Surles v. Cornell Corrections of California

• Decision Date: 13 March 2008
• Docket Number: No. A07A1677.,A07A1677.
• Parties: SURLES v. CORNELL CORRECTIONS OF CALIFORNIA, INC.
• Court: Georgia Court of Appeals

290 Ga. App. 260

659 S.E.2d 683

290 Ga.App. 260

SURLES v. CORNELL CORRECTIONS OF CALIFORNIA, INC.

No. A07A1677.

Court of Appeals of Georgia.

March 13, 2008.

Kaufman, Miller & Sivertsen, Robert J. Kaufman and Jordan B. Forman, Atlanta, for appellant.

King & Spalding, Nolan C. Leake, Atlanta, for appellee.

BERNES, Judge.

Defendant Robert B. Surles appeals from the final judgment and decree entered on the jury verdict in favor of plaintiff Cornell Corrections of California, Inc. on Cornell's claims for fraud and punitive damages brought against multiple defendants. Surles enumerates several errors that he contends entitle him to a new trial. First, he contends that the trial court erred in entering judgment on an allegedly confusing and internally inconsistent jury verdict. Second, Surles contends that the trial court erred in entering any judgment against him because he did not receive sufficient notice of trial. Third, he contends that the trial court erred in entering a judgment awarding punitive damages against him because the jury did not apportion punitive damages against every defendant found liable for fraud; there was insufficient evidence to support the jury's apportionment of punitive damages; and there was insufficient evidence to support an aggregate punitive damages award in excess of $250,000. For the reasons discussed below, we affirm on condition that the punitive damages award against Surles be properly reduced.

"On appeal, we examine the record in the light most favorable to the verdict and judgment." (Citation omitted.) Compris Technologies v. Techwerks, Inc., 274 Ga.App. 673, 673, n. 1, 618 S.E.2d 664 (2005). So viewed, the evidence shows that plaintiff-appellee Cornell provides correctional and rehabilitative services to state and local governments across the country. In 2003, defendant Longboat Global Advisors, LLC agreed to provide financing to a contractor that was constructing a juvenile correctional facility for Cornell in Colorado (the "Colorado Project"). As part of the financing arrangement, on August 28, 2003 Cornell entered into an "Escrow Disbursement Agreement" (the "Agreement") under which Cornell agreed to deposit $12,937,500 into what it believed was an escrow account at Bank of America in Atlanta. Under the Agreement, Bank of America, acting as escrow agent, was authorized to disburse Cornell's deposited funds only after completion of the Colorado Project. The Agreement was executed by Cornell, the Colorado contractor, and defendant Edgar J. Beaudreault as managing director of Longboat. The Agreement also contained the purported signature of an officer with Bank of America.

Following execution of the Agreement, Beaudreault provided Cornell with a Bank of America account number and wiring instructions, after which Cornell wired the money into the alleged escrow account. Unbeknownst to Cornell, however, an escrow account had not been created, and Beaudreault had forged the signature of Bank of America on the Agreement. Without Cornell's knowledge or consent, Beaudreault had instead arranged for Cornell's funds to be wired into a Longboat securities account, after which he transferred the funds into a different, newly-created bank account from which he could freely remove the funds. By the time Cornell discovered that it was being defrauded, Beaudreault had secretly removed $5,100,000 of Cornell's funds, which he had transferred to defendant Howard Sperling and his investment company, defendant Hasco Financial, for use in other investment projects. Additionally, defendant-appellant Surles had received $495,000 of Cornell's funds, either directly from Beaudreault or indirectly through Sperling, for the construction of a marina in Chicago. Furthermore, Beaudreault had transferred $287,500 of Cornell's funds into his own checking account, and his wife had received $170,500 of the funds indirectly through Sperling. In total, once the direct and indirect transfers to various parties were taken into account, $5,644,051.80 of Cornell's deposited funds had been removed in violation of the Agreement.

Beyond the money trail, Cornell presented further evidence at trial reflecting that Beaudreault, Sperling, and Surles had conspired together to misappropriate Cornell's funds. The three men knew each other prior to the commencement of the Colorado Project. Sperling and Surles had done several investment deals with one another over the years. Beaudreault and Sperling also had done several investment deals together prior to the Colorado Project. Sperling later introduced Surles to Beaudreault, and Surles in turn was actively involved in convincing Beaudreault and Longboat to become involved in the Colorado Project.

On August 14, 2003, Surles faxed Beaudreault a copy of a letter he had sent to Sperling about the Colorado Project, which included the draft of the proposed escrow disbursement agreement. In the letter, Surles described the Colorado Project and noted that Cornell planned to deposit $12,937,500 into an escrow account that would "basically be dormant for a period of 8 to 12 months." Surles offered Sperling "a shot at this deal" and emphasized that Sperling could "gain significant leverage on the money." Surles went on to suggest that perhaps he himself could receive a "loan" for his own investment project "for the same term" as Cornell's funds would lay dormant. Construed in favor of the verdict, the August 14 letter indicates that prior to execution of the Agreement, Beaudreault, Sperling, and Surles were devising a plan to appropriate Cornell's funds for their own use while the funds lay "dormant."

Cornell also presented evidence that when Cornell became concerned that it was not receiving bank statements for the escrow account, Beaudreault, Sperling, and Surles acted in concert to cover up the removal of Cornell's funds for their own use. Specifically, in November 2003, Cornell asked Beaudreault for documentation regarding the account. Beaudreault then told Cornell that Bank of America had decided not to serve as escrow agent and that he had transferred the funds into an escrow account at Fleet Bank. On December 4, 2003, Beaudreault sent a letter to Cornell in which he falsely assured Cornell that its $12,937,500 was being held "in a separate account" at Fleet Bank and would "only be disbursed upon completion of the [Colorado] Project." Attached to the December 4 letter was a purported e-mail from "Mark J." at Fleet Bank falsely confirming that Cornell's funds would be "set aside" and would be maintained "in a reserved status" until further instruction. According to Beaudreault, the intent of these correspondence was to reassure Cornell "that nothing was wrong."

Significantly, the language contained in the December 4 letter to Cornell — including the false assurances that all of Cornell's funds had been properly set aside — came almost verbatim from language suggested by Surles in an e-mail he had sent to Beaudreault and Sperling earlier that same day. Similarly, the language found in the purported Fleet Bank e-mail came almost verbatim from language suggested in an e-mail sent earlier that day to Beaudreault by Sperling.

Ultimately, Cornell learned that it had been defrauded, leading it to commence the instant action alleging that Longboat and Beaudreault were liable for fraud and seeking, among other things, compensatory and punitive damages. Cornell later amended its complaint and added Sperling, Hasco Financial, and Surles as defendants.¹ A trifurcated jury trial followed.²

In the first phase of the trial, the jury heard the evidence set out above and returned a verdict in favor of Cornell on its fraud claim against Beaudreault, Sperling, Hasco Financial, and Surles.³ The verdict form read as follows:

We, the jury, find for the Plaintiff as follows: $6,490,660.00 as damages. This award may be apportioned as follows:

$0 against Defendant Longboat Global Advisors, LLC;

$6,490,660.00 against Defendant Edgar J. Beaudreault, Jr.;

$6,490,660.00 against Defendant Hasco Financial;

$6,490,660.00 against Defendant Howard Sperling;

$6,490,660.00 against Defendant Robert B. Surles.

We, the jury, find for the Defendant Longboat Global Advisors, LLC.

In order to clarify the meaning of the verdict, the trial court then entered into the following colloquy with the jury foreperson:

COURT: All right. And you have zero by Longboat. As to the other defendants, are they to — how are they to be—

FOREPERSON: Okay. They're to pay $6,490,660.

COURT: Each defendant is to share in the single amount?

FOREPERSON: Right. It's to share.

COURT: To share jointly. So there is a single award?

FOREPERSON: Well, we have it down against all of them. Each name this amount is by.

COURT: So the total fraud award would be?

FOREPERSON: $6,490,660 as damage.

COURT: Thank you. Is the total fraud award.

FOREPERSON: Right.

In phase two of the trial, the jury heard additional instructions and argument concerning whether punitive damages were appropriate. The jury deliberated again and concluded that punitive damages should be awarded against Beaudreault, Sperling, and Surles, but not Hasco Financial. Finally, in phase three, after hearing additional evidence, argument, and instructions, the jury found that none of the defendants had acted with the specific intent to cause harm and awarded punitive damages apportioned in the amount of $12,937 against Beaudreault, $1,293,750 against Sperling, and $129,375 against Surles.

Surles subsequently moved for a new trial. In its order on the new trial motion, the trial court ruled, based on its colloquy with the jury foreperson, that the verdict on the fraud claim was intended to hold Beaudreault, Sperling, Hasco Financial, and Surles jointly and severally liable for $6,490,660 in compensatory damages. The trial court went on to rule, however, that Cornell had only sought and proven $5,644,051.80 in compensatory damages at trial, and that...