Summary
holding that the prejudgment interest rate applicable in a diversity case where Plaintiff prevailed on a claim under North Carolina's UDTPA statute was that prescribed under N.C. General Statute § 24–5(b)
Summary of this case from Guessford v. Pa. Nat'l Mut. Cas. Ins. Co.Opinion
1:01CV182.
July 10, 2003
MEMORANDUM OPINION
I. INTRODUCTION
Before the Court are various post-trial motions which the parties filed in the days following the jury's rendering of a verdict on January 22, 2003. First, Plaintiff Volumetrics Medical Imaging, Inc. ("VMI" or "Plaintiff") filed a Motion for Treble Damages and for Attorneys' Fees [Document #97] on January 27, 2003. Next, Plaintiff filed a Motion for Judgment Interest Pursuant to N.C. Gen. Stat. § 24-5(b) [Document #106] on February 18, 2003. Thereafter Plaintiff filed a Motion to Alter or Amend Judgment [Document #108], which sought to have the Court make changes to an Order and Judgment [Document #103] it filed on February 6, 2003. Finally, Defendant ATL Ultrasound, Inc. ("ATL" or "Defendant") filed two Motions on February 24, 2003, one was a Renewed Motion for Judgment as a Matter of Law [Document #116] made pursuant to Federal Rule of Civil Procedure 50 and Local Rule 7.3, the other, an Alternative Motion for a New Trial [Document #117], which was made pursuant to Federal Rule of Civil Procedure 59 and Local Rule 7.3. This Memorandum Opinion will set forth the Court's rulings on these Motions consistent with the manner in which they were announced in open court at a hearing held on June 11, 2003.
II. FACTUAL AND PROCEDURAL BACKGROUND
After a ten and a half day trial, the jury deliberated through the afternoon of the eleventh day and returned on the morning of the twelfth day to further deliberate until rendering a verdict in favor of Plaintiff that afternoon. Specifically, the jury answered "Yes" to the question of whether ATL committed a fraud upon VMI and it found that VMI was entitled to $106.25 million in compensatory damages and $45 million in punitive damages as a result. (See Verdict Sheet [Document #96].) The jury further found that VMI was harmed by negligent misrepresentations made by ATL but, consistent with the Court's closing instructions, it did not award monetary damages for this claim since such damages would have been duplicative of those awarded on the fraud claim. (Id.) Finally, with regard to Plaintiff's claim under North Carolina's Unfair and Deceptive Trade Practices Act ("UDTPA" or "the Act"), the jury responded in the affirmative to all of the seventeen written interrogatories the Court included on the Verdict Sheet which each described events that, if found by the jury to have occurred, would each, as a matter of law, constitute an "unfair and deceptive practice," according to the Court's interpretation of that statutory concept. (Id.) After indicating that the other elements of the UDTPA claim had been satisfied, that is, Defendant's conduct was in commerce and was a proximate cause of Plaintiff's injury, the jury then awarded a figure of $1 million in damages for this claim. (Id.)
As a procedural matter, it should be noted that Plaintiff's Motion to Alter or Amend the Judgment raises no substantive grounds independent of Plaintiff's previously filed Motion for Treble Damages and for Attorneys' Fees and Plaintiff's Motion for Judgment Interest. In fact, the Motion to Alter or Amend the Judgment states "the grounds for this Motion are set forth in" the pleadings VMI filed in support of the other two Motions. (Pl.'s Mot. to Alter or Amend J., at 1.) Therefore, the Motion to Alter or Amend the Judgment is essentially nothing more than a procedural vehicle for bringing the substantive claims of the other two Motions before the Court; by directly addressing the substantive claims in those two Motions this Memorandum Opinion will effectively address the Motion to Alter or Amend the Judgment as well. The Court will then address all of the parties' other Motions in turn.
III. DISCUSSION
A. Motion for Treble Damages and Attorneys' Fees
The Court will first address Plaintiff's Motion for Treble Damages and Attorneys' Fees, beginning with the treble damages portion of this Motion. Here, VMI argues that fraud is a per se violation of the UDTPA and, therefore, the compensatory damages awarded for that claim must be subjected to the Act's mandatory trebling provision. The trebling of the compensatory damages in this instance would yield a sum of $318.75 million in damages. VMI further contends that the jury's damage award for the fraud claim "and $1 million in additional compensation (for unfair and deceptive trade practices) are not duplicative, and therefore VMI may recover on both claims without any need for election of remedies." (Mem. in Supp. of Pl.'s Mot. for Treble Damages and for Attorneys' Fees, at 1.) Thus, VMI concludes, it is entitled to have this $1 million trebled as well and added to the trebled fraud award for a grand total of $321.75 million in damages. Defendant counters by arguing that, "when damages are awarded for both fraud and a violation of Chapter 75, a plaintiff must elect between the fraud damages, including any punitive damages, and the damages awarded for the unfair competition claim, which are trebled." (Def.'s Mem. In Opp'n to VMI's Mot. For Treble Damages and Attorneys' Fees, at 6.)
The issue of whether fraud is an unfair and deceptive trade practice so as to require trebling of the damages the jury awarded for fraud is within this Court's province to decide. As the North Carolina Court of Appeals explained in Kim v. Prof'l Bus. Brokers Ltd., 74 N.C. App. 48, 52-53, 328 S.E.2d 296, 300 (1985), "if unfair methods of competition or unfair or deceptive acts or practices in or affecting commerce under G.S. 75-1.1 are found, the court must treble the damages awarded. The determination of whether an act or practice affects commerce and is unfair or deceptive is to be made by the court." This determination involves a "two part inquiry: (1) whether the act or practice affects commerce, and (2) whether the act or practice is unfair or deceptive."Id. at 53, 328 S.E.2d at 300. As to the first part, for purposes of North Carolina's UDTPA "`commerce' includes all business activities, however denominated, but does not include professional services rendered by a member of a learned profession." N.C. Gen. Stat. § 75-1.1(b). This section "has been broadly applied to cover many activities." Kim, 74 N.C. App. at 53, 328 S.E.2d at 300. The jury specifically answered "Yes" on their verdict sheet in response to the question "was ATL's conduct in commerce?" (Verdict Sheet, at 5 [Document #96].) The Court finds that the jury's verdict was not against the weight of the evidence and further finds that ATL's various interactions with VMI fell within the broad notion of "business activities" and were therefore "in commerce."
Under the second part of the inquiry, the Court must decide whether the acts or practices found by the jury were unfair or deceptive. On this point Plaintiff's position is supported by North Carolina caselaw which provides that "[p]roof of fraud . . . necessarily constitute[s] a violation of the prohibition against unfair and deceptive acts . . .,"Hardy v. Toler, 288 N.C. 303, 309, 218 S.E.2d 342, 346 (1975), and therefore "[a] plaintiff who proves fraud thereby establishes that unfair or deceptive acts have occurred in violation of G.S. 75-1.1." Davis v. Sellers, 115 N.C. App. 1, 9, 443 S.E.2d 879, 884 (1994); see also Bhatti v. Buckland, 328 N.C. 240, 243, 400 S.E.2d 440, 442 (1991) ("The case law applying Chapter 75 holds that a plaintiff who proves fraud thereby establishes that unfair or deceptive acts have occurred."). Under the facts of the instant case, this principle mandates that the issue of whether to treble the fraud award must be decided in favor of Plaintiff.See Kim, 74 N.C. App. at 53,328 S.E.2d at 300 ("fraud, if proved, necessarily constituted a violation of the prohibition against unfair or deceptive practices. Plaintiff here obtained a jury finding of fraud. The trial court, therefore, had no choice but to treble plaintiff's damages."). During the hearing, the Court therefore held that the $106.25 million which the jury awarded to VMI on its fraud claim could be subjected to trebling as damages awarded for an unfair and deceptive trade practice.
The Court does not, however, subscribe to Plaintiff's theory that the additional $1 million in damages which the jury awarded for the UDTPA claim must also be trebled and added to the total award. When the jury found in favor of Plaintiff on the fraud claim, they necessarily determined that Defendant's actions rose to the level required to meet the elements of fraud. Proving fraud is more difficult than proving a violation of the UDTPA, which is why "[p]roof of fraud would necessarily constitute a violation of the prohibition against unfair and deceptive acts; however, the converse is not always true." Hardy, 288 N.C. at 309, 218 S.E.2d at 346. Therefore, if a UDTPA claim is presented to the jury along with a fraud claim, and fraud is found, that fraudulent conduct can become the basis for a violation of the UDTPA. See Davis, 115 N.C. App. at 9, 443 S.E.2d at 884 ("A plaintiff who proves fraud thereby establishes that unfair or deceptive acts have occurred in violation of G.S. 75-1.1. Once a violation of Chapter 75 is found, treble damages must be awarded. Since the jury found in favor of plaintiff on her fraud claim, plaintiff is entitled to treble damages." (citations omitted));Transamerica Occidental Life Ins. Co. v. Sanders, 91 F.3d 134 (table), 1996 WL 378310, at *1 (4th Cir. July 8, 1996) (vacating a judgment which had awarded $101,319.34 on a fraud claim and had trebled that same amount to the sum of $303,958.02 as an award on a UDTPA claim, then remanding the case so that the plaintiff could "elect its remedy: either $101,319.34 on the fraud claim or $303,958.02 on the unfair and deceptive trade practices claim."). Here, it is apparent that the conduct which forms the basis for both the fraud claim and the UDTPA claim is the same and it is well settled that a jury may not award multiple damage figures for the same conduct. See Borders v. Newton, 68 N.C. App. 768, 770, 315 S.E.2d 731, 732 (1984) ("When the same course of conduct gives rise to a traditional cause of action as well as a cause of action for violation of G.S. 75-1.1, damages may be recovered either for the traditional cause of action or for violation of G.S. 75-1.1, but not both."). Therefore, because the jury determined that Defendant's conduct amounted to fraud and the Court, in turn, determined that fraud constituted a per se violation of the UDTPA, the damages awarded for VMI's fraud claim can effectively become the damages awarded for the UDTPA claim.
Accordingly, during the hearing the Court required Plaintiff to make two elections. First, whether to (1) recover on the $1 million the jury specifically awarded for acts that presumably satisfied the UDTPA claim, but did not satisfy all of the elements of fraud, and have that amount trebled, or (2) to recover on fraud as a per se unfair and deceptive act and have the $106.25 million in compensatory damages trebled in accordance with N.C. Gen. Stat. § 75-16 of the UDTPA. Not surprisingly, Plaintiff chose the latter. The second election was whether to (1) recover directly on the common law fraud claim and therefore receive the $106.25 million in compensatory damages and an additional $45 million in punitive damages, or (2) to recover on the UDTPA claim with fraud as a per se violation of the UDTPA and have the $106.25 million in compensatory damages for fraud trebled. Again, Plaintiff chose the latter. Accordingly, consistent with the Court's ruling in open court on June 11, 2003, Plaintiff's Motion for Treble Damages and Attorneys' Fees will be granted in part, such that Plaintiff shall be awarded a total judgment of $318.75 million.
VMI points out that, during its final instructions to the jury, the Court indicated that the jury should not award damages more than once for the same injury and/or duplicate the damages awarded for the same conduct on a separate claim. VMI then argues that, because a jury is presumed to follow a court's instructions and because courts are required by the Seventh Amendment to, if possible, interpret the jury's verdict in a manner that makes it consistent and harmonious with the instructions, the Court should view the figures awarded for the fraud claim as distinct from the "small" amount of additional damages awarded for the UDTPA claim. (Reply in Supp. of Mot. for Treble Damages and for Attorneys' Fees, at 4.) As discussed earlier, it is for the Court, not the jury, to decide what constitutes an unfair and deceptive trade practice. To that end, the Court has determined that North Carolina law requires that fraud, and any damages awarded as a result, will per se constitute a UDTPA violation. Accordingly, the Court put Plaintiff to the two above-described elections for the very purpose of avoiding a duplicative award and insuring an interpretation of the jury's verdict that would be consistent with the Court's end of trial instructions.
The second half of Plaintiff's Motion contends that "VMI is entitled to attorneys' fees pursuant to North Carolina General Statutes § 75-16.1 whether or not the Court permits plaintiff to recover its UDTPA award." (Mem. in Supp. of Pl.'s Mot. for Treble Damages and Attorneys' Fees, at 6.) Whether to award such fees is within the sound discretion of the trial court and, under the UDTPA, a court may award such fees "if (1) the plaintiff is the prevailing party; (2) the defendant willfully engaged in a deceptive act or practice; and (3) the defendant unwarrantedly refused to fully resolve the matter." United States v. D'Elegance Management Ltd., 217 F.3d 843 (table), 2000 WL 966034, at *6 (4th Cir. July 13, 2000) (citing N.C. Gen. Stat. § 75-16.1(1)). Nevertheless, "[e]ven where the facts of a particular case will support a finding that the requirements of N.C. Gen. Stat. § 75-16.1 have been met and an award of attorney's fees may be warranted, the Court retains the discretion to deny the award." Basnight v. Diamond Developers, Inc., 178 F. Supp.2d 589, 592 (M.D.N.C. 2001). Here, the first two statutory considerations raise no significant issues. First, the jury's verdict in favor of Plaintiff makes VMI the prevailing party and, second, the jury's finding that Defendant committed a fraud against VMI implicitly indicates that Defendant's behavior was wilful. See D'Elegance Management Ltd., 2000 WL 966034, at *7 ("[Defendant] . . . contends that the finding of fraud does not encompass a finding that [Defendant] willfully engaged in the deceptive act. [Defendant] is incorrect. Intent to deceive is indeed an element of fraud.").
There is, however, some disagreement over the third consideration in that VMI insists that "ATL's failure to `seriously discuss' settling this matter outside of court satisfies this prong of the UDTPA attorneys' fees inquiry." (Mem. in Supp. of Pl.'s Mot. for Treble Damages and Attorneys' Fees, at 7.) As the plaintiff, VMI "has the burden to prove that Defendant['s] refusal to settle was unwarranted." Llera v. Security Credit Systems, Inc., 93 F. Supp.2d 674, 680 (W.D.N.C. 2000). In this regard, VMI merely states that "ATL's highest settlement offer prior to trial was for no more than 1% of the actual and punitive damages awarded by the jury," and argues that this discrepancy serves as an undeniable indication that ATL unwarrantedly refused to settle the matter. (Mem. in Supp. of Pl.'s Mot. for Treble Damages and Attorneys' Fees, at 7.) The Court does not agree that an unwarranted refusal to settle can be demonstrated solely from a proportional comparison between the jury's ultimate award and Defendant's highest offer of settlement. Plaintiff's reliance on this factor alone is not demonstrative of an unwarranted refusal to settle. Defendant, on the other hand, has presented evidence on this issue in the form of a sworn affidavit-with several exhibits-which chronicles the settlement efforts between the parties. As with the other two statutory factors, a plaintiff must prove that a defendant unwarrantedly refused to settle by a preponderance of the evidence. Id. at 676. Given the only evidence before the Court on this issue, it appears that Defendant exhibited no less enthusiasm about reaching settlement than Plaintiff. Defendant's settlement efforts as detailed in the affidavit certainly do not amount to an unwarranted refusal to fully resolve the matter. Accordingly, the Court finds that VMI has failed to show, by a preponderance of the evidence, that all three statutory factors required for an award of attorneys' fees under North Carolina's UDTPA are present in this case. Therefore, the Court will deny Plaintiff's Motion to the extent that it requests an award of attorneys' fees based upon the alleged unwarranted refusal of Defendant to fully settle this matter.
B. Motion for Judgment Interest Pursuant to N.C. Gen. Stat. § 24-5(b)
Plaintiff's final outstanding motion is a Motion for Judgment Interest Pursuant to N.C. Gen. Stat. § 24-5(b) [Document #106]. At the June 11, 2003 hearing both sides indicated that this Motion was, essentially, uncontested and that any disagreement as to the applicable interest rates had been resolved. The Court will therefore grant Plaintiff's Motion for Judgment Interest. Plaintiff will be awarded prejudgment interest on the total amount of compensatory damages, $106.25 million, from February 16, 2001 until the judgment is satisfied. See N.C. Gen. Stat. § 24-5(b) ("In an action other than contract, any portion of a money judgment designated by the fact finder as compensatory damages bears interest from the date the action is commenced until the judgment is satisfied." (emphasis supplied)). Because this is a diversity case, the state interest rate of 8% mandated by N.C. Gen. Stat. § 24-1 will be used for calculating prejudgment interest. See United States v. Dollar Rent A Car Sys., Inc., 712 F.2d 938, 940 (4th Cir. 1983) ("Courts have held that state law applies to questions involving prejudgment interest in diversity cases.").
Plaintiff will further be awarded postjudgment interest on the entire trebled $318.75 million figure. See Custom Molders, Inc. v. American Yard Prods., Inc., 342 N.C. 133, 140, 463 S.E.2d 199, 203 (1995) (allowing recovery of postjudgment interest on the full amount of a judgment, including the potion trebled pursuant to the UDTPA). The proper rate for calculating postjudgment interest is 1.07%, pursuant to the direction provided by 28 U.S.C. § 1961. Therefore, Plaintiff is entitled to recover postjudgment interest on the final judgment of $318.75 million dollars at a rate of 1.07% until the judgment is fully satisfied.
In its discussion of this issue, Defendant uses 1.32% as the rate required by 28 U.S.C. § 1961. That rate is no longer accurate because section 1961 provides that "interest shall be calculated from the date of the entry of the judgment, at a rate equal to the weekly average 1-year constant maturity Treasury yield, as published by the Board of Governors of the Federal Reserve System, for the calendar week preceding the date of the judgment." 28 U.S.C. § 1961. For the week ending July 4, 2003, the weekly average 1-year constant maturity Treasury yield was 1.07%. See http://www.federalreserve.gov/releases/hl5/current/ . Therefore, the Court deems 1.07% to be the appropriate rate for calculating postjudgment interest on the damages awarded herein.
C. Defendant's Motions — Renewed Motion for Judgment as a Matter of Law; Alternative Motion for a New Trial
The final outstanding motions are Defendant's Renewed Motion for Judgment as a Matter of Law [Document #116] brought pursuant to Fed.R.Civ.P. 50(b) and Alternative Motion for a New Trial [Document #117], pursuant to Fed.R.Civ.P. 59(a). Turning first to the Motion for Judgment as a Matter of Law, the Fourth Circuit has stated that "[a] Rule 50(b) motion for judgment as a matter of law follows the same standard as a Rule 56 motion for summary judgment." Dennis v. Columbia Colleton Med. Ctr., Inc., 290 F.3d 639, 644 (4th Cir. 2002). A court "must view the evidence in the light most favorable to [VMI], the nonmovant, and draw all reasonable inferences in [its] favor without weighing the evidence or assessing the witnesses' credibility." Id. at 645. A court "must reverse if a reasonable jury could only rule in favor of [Defendant]; if reasonable minds could differ, [the court] must affirm." Id. After considering the arguments Defendant has made, both in its brief in support of this Motion and during the June 11,2003 hearing, the Court finds that, drawing all reasonable inferences in Plaintiff's favor, there was substantial evidence adduced to support all aspects of Plaintiff's claims. At a bare minimum, reasonable minds could differ and another jury could very possibly have reached the same conclusion reached by this jury. Accordingly, the Court will affirm the jury's findings and deny Defendant's Renewed Motion for Judgment as a Matter of Law.
With respect to Defendant's Alternative Motion for a New Trial, the relevant portion of the governing rule reads:
[a] new trial may be granted to all or any of the parties and on all or part of the issues (1) in an action in which there has been a trial by jury, for any of the reasons for which new trials have heretofore been granted in actions at law in the courts of the United States. . . .
Fed.R.Civ.P. 59(a). A motion for a new trial differs from a motion for directed verdict in that a trial judge, in dealing with a motion for a new trial, "may weigh the evidence and consider the credibility of the witnesses. . . ." Poynter by Poynter v. Ratcliff, 874 F.2d 219, 223 (4th Cir. 1989). Thus, on a motion for a new trial,
"it is the duty of the judge to set aside the verdict and grant a new trial, if he is of the opinion that [1] the verdict is against the clear weight of the evidence, or [2] is based upon evidence which is false, or [3] will result in a miscarriage of justice, even though there may be substantial evidence which would prevent the direction of a verdict."Atlas Food Sys. Servs., Inc. v. Crane Nat'l Vendors, Inc., 99 F.3d 587, 594 (4th Cir. 1996) (quoting Aetna Cas. Sur. Co. v. Yeatts, 122 F.2d 350, 352-53 (4th Cir. 1941)). The Court has already noted that there was substantial evidence adduced to support Plaintiff's claims, therefore it cannot be said that the verdict is against the clear weight of the evidence, nor does it appear that the verdict was based upon evidence which is false. Finally, the Court is not of the opinion that the verdict will result in a miscarriage of justice if a new trial is not granted. Thus, the Court will deny Defendant's Motion for a New Trial.
IV. CONCLUSION
The Court has closely considered all outstanding post-trial Motions filed by both parties and, consistent with the announcements made at the June 11, 2003 hearing, reaches the following conclusions. Plaintiff's Motion to Alter or Amend the Judgment [Document #108] will be GRANTED IN PART, to the extent the following two motions are granted. Plaintiff's Motion for Treble Damages and for Attorneys' Fees [Document #97] will be GRANTED IN PART such that the compensatory damages awarded on the fraud claim will be trebled as damages arising from a per se unfair and deceptive trade practice; the Motion will be DENIED IN PART in that Plaintiff will not be awarded attorneys' fees. Plaintiff's Motion for Judgment Interest [Document #106] is GRANTED in full, as discussed above. Finally, Defendant's Motion for Judgment as a Matter of Law [Document #116] and its Motion for a New Trial [Document #117] will both be DENIED. An Amended Order and Judgment consistent with this Memorandum Opinion will be filed contemporaneously herewith.