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Hunt v. Hadden

United States District Court, E.D. Michigan, Southern Division

September 2, 2015

DAVID HUNT and CAROL SANTANGELO, Plaintiffs,
v.
DONNELLY HADDEN, and DONNELLY W. HADDEN, P.C., Defendants

Page 781

          For David Hunt, Carol Santangelo, Plaintiffs: Michael C. Curhan, Bloomfield Hills, MI.

         For Donnelly Hadden, Donnelly W. Hadden, P.C., Defendants: M. Ellen Dennis, Saline, MI.

Page 782

         SUPPLEMENTAL OPINION ON CROSS MOTIONS FOR SUMMARY JUDGMENT

         Honorable David M. Lawson, United States District Judge.

         This case began as a legal malpractice case, but eventually was pared down by the plaintiffs to claims of conversion, breach of fiduciary duty, and fraud, based on the plaintiffs' former attorney charging legal fees in excess of the parties' retainer agreement. After discovery closed, the parties each filed motions for summary judgment. The Court denied the defendants' motion and granted the plaintiffs' motion in part, finding that the defendants were liable for statutory conversion and fixing the amount converted. The Court held that a jury must decide whether the plaintiffs are entitled to treble damages under Michigan's conversion statute. Subsequently, the parties each filed motions for reconsideration, in part focusing on the amount of damages. It became apparent that there was a material fact dispute over that amount, and the Court vacated that part of its prior opinion, leaving the amount of damages for jury determination, along with the treble damage issue.

         At a status conference held thereafter, the parties raised additional issues, not addressed in their summary judgment briefs, pertaining to attorney fees, the requisite proofs for treble damages, and whether expert testimony could be offered. The Court ordered the parties to submit supplemental briefs addressing the following issues: (1) What are the relevant factors for the jury to consider in determining whether the plaintiffs are entitled to treble damages under Michigan Compiled Laws § 600.2919a? (2) Who decides whether and how much to award in attorney fees under section 600.2919a: the jury at trial, or the Court upon motion after trial under Federal Rule of Civil Procedure 54(d)? (3) Should the Court permit expert testimony on whether the plaintiffs should be awarded treble damages? The parties have submitted their supplemental briefs.

         I. Treble Damages

         After the Court filed its opinion and order, the Michigan Supreme Court issued its opinion in Aroma Wines & Equip., Inc. v. Columbian Distribution Servs., Inc., 497 Mich. 337, 871 N.W.2d 136 (2015). The court determined that, to be liable for statutory conversion, a plaintiff must show " that the defendant employed the converted property for some purpose personal to the defendant's interests, even if that purpose is not the object's ordinarily intended purpose." Aroma, 497 Mich. 337, slip op. at 4. The court, however, declined to review whether an award of treble damages is a matter of discretion for the jury. Id. at 7 n.10. As this Court stated in its previous opinion, the Michigan intermediate appellate court decisions commit that determination to the jury.

         The defendants maintain that treble damages are akin to punitive damages, although they cite no Michigan authority in support of that argument. Nonetheless, they contend that the requisite showing therefore must be sufficient to justify a punitive damage award. The plaintiffs point out that treble damages are not always identified as punitive damages, and

Page 783

sometimes a different standard of proof is appropriate.

         The plaintiffs cite Johnson v. Jensen, 433 N.W.2d 472 (Minn. Ct.App.), rev'd in part on other grounds, 446 N.W.2d 664 (Minn. 1989), for the proposition that " [t]he standard o[f] proof required for the imposition of punitive damages is not the same as the standard o[f] proof required for the imposition of treble damages." Id. at 476. That is certainly the case in some states. For instance, the Minnesota Supreme Court recognized that " there are differences between a statutory award of multiple damages, which represents a fixed amount and does not necessarily reflect a judgment concerning the culpability of the [defendant]'s conduct, and an award of punitive damages at common law, which is assessed by the jury and thus reflects the community's condemnation of a defendant's conduct when it is viewed as wanton, malicious, or outrageous." Wojciak v. N. Package Corp., 310 N.W.2d 675, 680 (Minn. 1981).

         Similarly, in Cieslewicz v. Mut. Serv. Cas. Ins. Co., 84 Wis.2d 91, 267 N.W.2d 595 (Wisc. 1978), the Wisconsin Supreme Court identified three differences between common law punitive damages and statutory multiple damages under Wisconsin law. First, the court noted that punitive damages are awarded only if the plaintiff establishes a specific state of mind, but found that state of mind is irrelevant to an award of treble damages under Wisconsin law. Id. at 600. Second, the court said that common law punitive damages are assessed in the discretion of the jury, but " [m]ultiple damages, on the other hand, are assessed whenever the statutory requirements are met, and the plaintiff is entitled to multiple damages on that showing alone." Ibid. Third, the court noted that the wealth of the defendant must be considered when calculating punitive damages, but wealth has nothing to do with the assessment of statutory multiple damages. Id. at 600-01.

         The national jurisprudence recognizes a difference between punitive damages denominated as such, and multiple damages, acknowledging that multiple damages are not always punitive. " When the award of multiple damages is intended to serve penal purposes, it is a substitute for punitive damages, and the same or similar proof requirements usually must be satisfied." Dist. Cablevision Ltd. P'ship v. Bassin, 828 A.2d 714, 726 (D.C. 2003). " On the other hand, multiple damages provisions may be enacted to serve remedial rather than punitive purposes, such as ensuring full compensation or encouraging private enforcement of the law." Ibid. Similarly, in a series of cases, the Supreme Court has " placed different statutory treble-damages provisions on different points along the spectrum between compensatory and strictly punitive awards." PacifiCare Health Sys., Inc. v. Book, 538 U.S. 401, 405, 123 S.Ct. 1531, 155 L.Ed.2d 578 (2003) (collecting cases). As the Supreme Court has noted, " the tipping point between payback and punishment defies general formulation, being dependent on the workings of a particular statute and the course of particular litigation." Cook Cnty., Ill. v. United States ex rel. Chandler, 538 U.S. 119, 130, 123 S.Ct. 1239, 155 L.Ed.2d 247 (2003). Indeed, at least one court of appeals has instructed that " treble damages statutes defy easy categorization as compensatory or punitive in nature." Alea London Ltd. v. Am. Home Services., Inc., 638 F.3d 768, 777 (11th Cir. 2011). Instead, " [w]hether treble damages under a given statute are considered compensatory or punitive is an intensely fact-based inquiry that may vary statute-to-statute." Ibid. (citations omitted).

         Those articulated distinctions between punitive damages and multiple damages

Page 784

are sensible and well-reasoned. However, they do not appear to have taken root in Michigan jurisprudence. The nature and amount of damages to which a plaintiff is entitled is a matter of substantive law. See Blasky v. Wheatley Trucking, Inc., 482 F.2d 497, 498 (6th Cir. 1973). Because this is a diversity action, the Court must follow Michigan substantive law, as prescribed by the state's highest court. Erie R.R. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938). And because the Michigan Supreme Court has not addressed whether the requirements to impose punitive and statutory multiple damages are the same, the Court " must predict how it would resolve the issue from 'all relevant data.'" Kingsley Associates, Inc. v. Moll PlastiCrafters, Inc., 65 F.3d 498, 507 (6th Cir. 1995) (citing Bailey v. V & O Press Co., Inc., 770 F.2d 601, 604 (6th Cir. 1985)). " Relevant data include decisions of the state appellate courts, and those decisions should not be disregarded unless we are presented with persuasive data that the Michigan Supreme Court would decide otherwise." Ibid. (citing FL Aerospace v. Aetna Casualty and Surety Co., 897 F.2d 214, 218-19 (6th Cir. 1990)).

         Every Michigan court to consider the issue has found that treble damages under Michigan Compiled Laws § 600.2919a is punitive in the traditional sense, that is, to punish the defendant for wrongdoing. See e.g.,Peisner v. Detroit Free Press Inc., 421 Mich. 125, 143 n.4, 364 N.W.2d 600, 609 (1984) (describing treble damages as an example of " true 'punitive' (i.e., punishment-type) damages" ); Shepard v. Gates, 50 Mich. 495, 498, 15 N.W. 878, 880 (1901) (" [T]reble damages are ...


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