Case Number: 17-0009
Tri-State Petroleum, et al. v. Kevin P. Coyne
Type of Proceeding
Appeal the Circuit Court of Ohio County (Justice Starcher, by appointment)
1. Whether the Circuit Court erred by granting an equitable award of approximately $1.5 million in attorney’s fees without providing any meaningful explanation as to why the award was justified or how such an award was calculated.
2. Whether the Circuit Court erred by reversing a decision by the prior judge assigned to the case, allowing Respondent to seek, for himself, damages only available to the corporation in a properly instituted shareholder derivative action under a breach of fiduciary claim.
3. Whether the Circuit Court erred by refusing to dismiss Respondent’s breach of fiduciary duty claim as duplicative of his contract claim.
4. Whether the Circuit Court erred by refusing to grant summary judgment to the individual Petitioners on the contract claims.
5. Whether the Circuit Court erred by refusing to grant summary judgment to Petitioner Colleen McGlinn on Respondent’s fraud claim.
6. Whether the Circuit Court erred by using a general verdict form.
This matter involves the appeal of a complex business case about one family member’s lawsuit challenging the redemption value of his interests in several family-owned businesses. The Respondent, Kevin P. Coyne, who was both an owner and employee of certain family businesses, was discharged for just cause based on evidence of extensive misconduct. The Respondent’s interests were redeemed under the express terms of the governing shareholder and partnership agreements that bound the parties and he was paid according to the fair market valuation procedures common in such agreements. Respondent, taking issue with the redemption payout, filed suit against the Petitioners, his siblings and the corporate and partnership entities, alleging the Petitioners engaged in a number of plots against him. Trial commenced resulting in a $5,053,111 verdict in favor of Petitioner (with a set-off amount of $1,819,200 representing amounts already paid to Respondent for his interests or to be paid to him in cash and under various promissory notes). It is from this verdict that Petitioners appeal.
Positions of the Parties
On the Award of Attorneys’ Fees:
Petitioners argue the court failed entirely, in writing or during hearing, to explain why an equitable award was supported by the record; and that the court failed entirely to conduct any analysis as to the reasonableness of the award under Aetna Cas. & Sur. Co. v. Pitrolo, 176 W.Va. 190,342 S.E.2d 156 (1986). Petitioner also argues that the court’s award of prejudgment interest failed to comport with well-settled law because Respondent’s damages were neither “special damages” nor an “ascertainable pecuniary loss” under W. Va. Code § 56-3-31 and Syl. Pt. 3, Capper v. Gates, 193 W. Va. 9, 12,.454 S.E.2d 54, 57 (1994).
Respondent argues that the court presided over two weeks of trial testimony (which it incorporated into its rationale) and held a hearing where it made the required legal rulings and factual rulings. Respondent argues that those rulings and findings are manifestly within the court’s broad discretion and that West Virginia courts have equitable authority to award attorney’s fees to a prevailing litigant in a breach of fiduciary duty case.
On the Breach of Fiduciary Claim:
Petitioners argue the court erred by failing to dismiss Respondent’s breach of fiduciary duty claim because it was based on the alleged breach of duties established by the Governing Agreements. This attempt to disguise a contract claim as tort claim to avoid contractual terms–including contract damages–is barred by the “gist of the action” doctrine. Gaddy Eng’ng Co. v. Bowles Rice McDavid Graff & Love, 231 W. Va. 577, 746 S.E.2d 568 (2013).
Respondent argues that the gist of the action doctrine does not preclude fiduciary breach claims where, as here, those claims do not arise exclusively from the parties’ contracts, but instead rest on the larger legal interests and social policies embodied in the law of fiduciary duties to minority shareholders.
On the Contract Claim:
Petitioners argue that the court repeatedly refused to recognize, much less enforce, any legal distinctions between the liability of individuals and the corporate and partnership Petitioners and that the court’s decision infected the verdict form, which lumped together all Petitioners on a general verdict form on the basis of the court’s mistaken view that all of the Petitioners were a “family business,” disregarding basic concepts of business law and limited liability.
Respondent argues that the individual Defendants were parties to and individually signed the agreements. The jury found they had breached and, as a result, the individual Defendants are liable, along with the corporate Defendants, for breaches of the agreements.
On the Issue of Summary Judgment on the Contract Claims:
Petitioners argue that the court abandoned its gatekeeping role in denying Petitioners summary judgment, and later judgment as a matter of law, on Respondent’s contract claims. Petitioners argue that Respondent presented no relevant evidence disputing the purchase price of his interests–the “fair market valuation”–as determined by the Board of Directors pursuant to the terms of certain governing agreements.
Respondent argues that, under the Agreements, he was entitled to 80% of the value of his interests, even if he were terminated for cause. Respondent further argues that he presented evidence that his share of the business was worth at least $9.7 million, which, if he was terminated for just cause, would entitle him to 80%, or about $7.8 million. He argues the jury’s award of $5.1 million was well within that amount. Therefore, even if there was no genuine factual dispute that Petitioner was terminated for just cause, the verdict amount would still stand.
On the issue of prejudgment interest, Respondent argues that “special damages” are merely those “sustained in the circumstances of a particular wrong,” which “must be specifically claimed and proved,” citing Black’s Law Dictionary (10th ed. 2014). Respondent argues that definition perfectly describes the damages at issue, which were specifically proven at trial through extensive expert testimony.
On the Issue of Summary Judgment on the Fraud Claims:
Petitioners argue that the court erred by denying Petitioner Colleen McGlinn’s motion for summary judgment on Respondent’s fraud claim against her because it was filed beyond the two-year statute of limitations. Petitioners contend that, although the jury returned a verdict on this count favorable to Ms. McGlinn, by reason of this error, the jury was subjected to highly prejudicial evidence about supposed “plots” against Respondent by all his siblings going back many years that would have otherwise been inadmissible.
Respondent argues that he submitted substantial evidence in opposition to summary judgment demonstrating genuine issues of material fact regarding the fraud claims. Respondent argues further that if Defendants felt they would be prejudiced by defending the breach of fiduciary duty and contract claims at the same time the fraud claim was tried, they could have moved to bifurcate the issues after denial of summary judgment on fraud, but did not. With regard to the statute-of-limitations issue, Respondent argues that although he knew the dictated redemption price was unfairly low, he did not have the bulk of the evidence regarding Colleen’s bad intentions and her extensive covert actions to carry out her plan to work against his interests and harm him. He also contends that all of the fraud evidence also went to breach of fiduciary duty and would have been introduced even without a fraud claim.
On the Issue of the Verdict Form:
Petitioners argue that the court’s refusal to use anything other than a simplistic general verdict form, which asked the jury to decide the collective liability of all Petitioners, without any distinction between the individuals or corporations on each count or the amount of damages to be so awarded, was indicative of the court’s unwillingness to apply fundamental tenets of business law and was an abuse of discretion.
Respondent argues that Petitioners did not object to the Court’s verdict form at the time it was presented or say it was problematic because it did not address each Defendant separately and have not explained what difference their preferred verdict slip would have made.
This case offers the opportunity for further clarification of the delineation between individual and business entity conduct as well as the law on attorneys’ fees awards. In addition, it may also have an impact on setting boundaries between West Virginia’s civil and business courts in terms of the types of actions heard by those courts.