Doug Boydston died while cleaning up debris after a 2014 tornado destroyed property that his tenant had allegedly underinsured, leaving his widow to prevail in a $1 million civil dispute over the coverage.
Now the tenant, Danny W. Brown, and his attorneys are asking the Arkansas Supreme Court to review the Arkansas Court of Appeals’ affirmation of the trial court’s decision, arguing that it shakes up decades of legal precedent in two areas:
► Awarding both punitive damages ($230,000 in this case) and attorneys fees ($200,000) in a case that has elements of both tort and contract law.
► Holding a party liable for conversion even though the money in question was being held by the court — and even though the trial court had previously recognized a “good faith” effort to settle the dispute.
If the ruling is allowed to stand, Brown’s attorneys predict that civil complaints across the state will be crafted in hopes of extracting both punitive damages and attorneys fees when they would previously have sought only one or the other.
“I’m personally opposed to Issue 1 for numerous reasons,” said Kent Walker, the North Little Rock attorney who represented Brown before Pulaski County Circuit Judge Mackie Pierce. “But I can see how this opinion would empower people to be for it to limit punitive damages and attorney fees through double recovery.” (For more on Issue 1, see The Pros and Cons of Arkansas Tort Reform.)
Accord and satisfaction
In contract law, an agreement between parties to alter an existing agreement. Accord and satisfaction is a common way to resolve disputes out of court, especially when the parties disagree about the terms of the existing contract.
A tort in which one converts another’s property to his own use.
Damages exceeding simple compensation and awarded in a civil proceeding to punish the party held liable for a wrongful act.
A wrongful act or an infringement of a right (other than under contract) leading to civil legal liability.
Brown’s attorneys also argue that the ruling sets a new precedent for concerning a routine technique for settling disputes out of court known legally as “accord and satisfaction.”
After reviewing the Court of Appeals decision, Howard W. Brill, the University of Arkansas School of Law professor who wrote a book on Arkansas law regarding damages, agreed that Brown’s appeal raises a worthy question.
“I am not aware of any cases where the court has awarded fees on a contract claim and punitive damages on the tort aspect of the case,” Brill said in an email to Arkansas Business. “Either alone can easily be justified and supported. Combining them in a single case presents unique policy considerations.”
Contract Law 101
As always, the details of the case styled DWB LLC v. D&T Pure Trust are unique. The legal questions, however, are fairly basic. Arkansas law allows the winning party in a contract dispute to seek attorneys fees, which Doug Boydston’s widow, Toni, did on behalf of their trust.
With a few exceptions spelled out in law, attorneys fees are not allowed in tort cases — which is why, for example, personal injury lawyers take their fees out of the damages awarded to clients. Those damages can include punitive damages, which are intended to punish bad behavior on top of making the winning party whole.
But what of cases, like DWB v. D&T, that are hybrids of both contract law and tort law?
“It is actually rather common for both contract and tort claims to arise from the same set of facts,” said Joshua M. Silverstein, professor of law at the University of Arkansas at Little Rock’s Bowen School of Law.
What’s more, Silverstein said, “There are certain special circumstances in which the parties have to engage in what is called ‘election of remedies,’ where you do have to choose between tort and contract. It is possible that this election of remedies applies in this case.”
Walker and Andy Taylor of Little Rock, the appellate lawyer who filed Brown’s request for a review by the state Supreme Court, believe DWB v. D&T is just such a case, and they argue that it is primarily a tort case because the portion of the verdict that applied to the tort question was greater than the portion that applied to the contract question.
(They also argue that the judges have decided that tort question incorrectly. If the Supreme Court agreed, both the attorneys fees and punitive damages could go away.)
Pat James, the Little Rock lawyer who won the case for Toni Boydston, disagrees, naturally. He points out that breach of contract accounted for six of the eight claims for which damages were awarded to Boydston, supporting the award of attorneys fees — as the lease contract contemplated in the first place.
(“Both the trial court and the court of appeals found that the action was primarily in contract,” Brill noted, which was the basis for awarding the $200,000 in attorneys fees.)
James also thinks his client was due the punitive damages because Brown insisted on a condition — that Doug Boydston not seek more money — before he would turn over the insurance proceeds that both parties agreed belonged to Boydston.
“They don’t get a pass on tortious conduct by having a contract in the case,” James said, and Pierce and the three-judge Court of Appeals panel agreed.
Silverstein, the Bowen School professor, agreed that parties are not entitled to double recovery. But punitive damages, he said, “are not applicable to double recovery because they are not payment for harm. They are punishment.”
Danny Brown is a former CPA who owns RBD Construction Inc. of Pine Bluff and Willy D’s Rock & Roll Piano Bar in Little Rock’s River Market district. He bought Mayflower R.V. from Doug Boydston in March 2013 for $1.2 million, but Boydston retained ownership of the RV dealership’s real estate in Mayflower, Malvern and Van Buren, and rented the locations to Brown.
The lease agreement required Brown to maintain replacement cost insurance on the properties. According to evidence presented to Judge Pierce, Boydston had insured the Mayflower property for more than $700,000 before the sale, based on a professional valuation.
Brown waited weeks to insure the properties, and then insured the Mayflower property for a maximum of $450,000.
About a year later, in May 2014, the Mayflower property was destroyed by a tornado, and Brown’s insurance carrier paid the maximum amount. Brown promptly offered Boydston the $450,000 insurance settlement — but only if Boydston would agree that he was not owed the full replacement cost required by the lease.
Boydston refused. And in September 2014, Brown sued Boydston, claiming Boydston — a licensed insurance agent himself — knew the limit of the coverage and had tacitly agreed to it by not insisting on more. Boydston countersued, and the $450,000 was deposited with the court pending the outcome of the dispute.
Days later, Boydston died at age 50 when a utility vehicle he was using to clear debris on the Mayflower site flipped over.
After a four-day bench trial in February 2016, Pierce awarded Boydston’s trust the $450,000 insurance settlement, the $154,500 difference between the insurance payment and the replacement cost of the property, $40,500 in accrued interest and $230,000 in punitive damages because Brown refused to give Boydston the insurance proceeds without placing restrictions on them.
Pierce also awarded Toni Boydston a $10,000 debris-removal insurance check that Brown never told Boydston he had received since it was not required by the lease. And he ordered Brown to pay the Boydstons’ attorney, Pat James of Little Rock, $200,000 in fees.
While the dispute was in court, Brown sold the RV business in 2015 for $1.7 million, 40 percent more than he paid two years earlier.
One of the elements of this case that Walker finds most disturbing is the finding of conversion — that is, the tort of converting someone else’s property to one’s own use. Brown had offered the $450,000 insurance proceeds to Boydston, provided he would agree that it satisfied the requirements of their contract. When Boydston refused that offer, Brown sued. Boydston chose to have the money held by the court, and, as Taylor wrote in the appeal to the state Supreme Court, Pierce “expressly held that the funds had been tendered ‘in good faith.’ ”
“The opinion treats a valid attempt to effect an accord and satisfaction as a conversion of the funds, upending over a century of caselaw and bringing into question the viability of the accord and satisfaction doctrine,” Taylor wrote.
James, the Boydstons’ lawyer, pointed out in a response that the finding of good faith came “after a non-evidentiary hearing,” and argued that Judge Pierce was free to change his opinion of the offer after four days of testimony.
“When awarding punitive damages,” the Court of Appeals wrote, “the circuit court found that appellants had ill will — that Brown received no benefit from controlling the money and that keeping it harmed appellees. The circuit court further found that Brown was utterly remorseless for his actions. Brown’s own testimony supports these findings — he testified that he had no regrets and that if he had it to do over again, he would do the same thing.”