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Legacy Data Access, Inc. v. Cadrillion, LLC

United States Court of Appeals, Fourth Circuit

May 3, 2018

LEGACY DATA ACCESS, INC., a Georgia corporation; DIANNE M. PETERS, a Georgia resident, Plaintiffs - Appellees,
v.
CADRILLION, LLC, a North Carolina limited liability company; JAMES YUHAS, a North Carolina resident, Defendants - Appellants, and LEGACY DATA ACCESS, LLC, a North Carolina limited liability company, Defendant. LEGACY DATA ACCESS, INC., a Georgia corporation; DIANNE M. PETERS, a Georgia resident, Plaintiffs - Appellants,
v.
CADRILLION, LLC, a North Carolina limited liability company; LEGACY DATA ACCESS, LLC, a North Carolina limited liability company; JAMES YUHAS, a North Carolina resident, Defendants - Appellees.

          Argued: March 22, 2018

          Appeals from the United States District Court for the Western District of North Carolina, at Charlotte. Frank D. Whitney, Chief District Judge. 3:15-cv-00163-FDW-DCK

         ARGUED:

          Glen Kirkland Hardymon, RAYBURN COOPER & DURHAM, P.A., Charlotte, North Carolina, for Appellants/Cross-Appellees.

          John Robert Buric, JAMES, MCELROY & DIEHL, P.A., Charlotte, North Carolina, for Appellees/Cross-Appellants.

         ON BRIEF:

          Benjamin E. Shook, RAYBURN COOPER & DURHAM, P.A., Charlotte, North Carolina, for Appellants.

          Preston O. Odom III, John R. Brickley, JAMES, MCELROY & DIEHL P.A., Charlotte, North Carolina, for Appellees/Cross-Appellants.

          Before MOTZ, DUNCAN, and HARRIS, Circuit Judges.

          DIANA GRIBBON MOTZ, CIRCUIT JUDGE:

         In this diversity contract dispute, a jury awarded $256, 500 for breach of contract and $1, 499, 999 for conversion. The jury rejected plaintiffs' unfair and deceptive trade practices claim, and the district court granted judgment as a matter of law to defendants on the abuse of process claim. In a second trial solely on punitive damages, another jury awarded $3 million in punitive damages. In response to numerous post-trial motions, the district court reduced compensatory and punitive damages, awarded attorneys' fees to plaintiffs, and otherwise denied the remaining motions. For the reasons that follow, we reverse the judgment of the district court as to conversion and punitive damages, remand for a new trial on damages for breach of contract, vacate the attorneys' fees award, and affirm as to the abuse of process and unfair and deceptive trade practices claims.

         I.

         A.

         Legacy Data Access, Inc. ("Legacy Georgia") and its owner Dianne Peters (collectively, "Plaintiffs") agreed to sell certain assets to Cadrillion, LLC ("the Agreement"). Cadrillion formed a subsidiary, Legacy Data Access, LLC ("Legacy North Carolina"), to own the assets and operate the business acquired from Legacy Georgia. Cadrillion also hired Peters to manage Legacy North Carolina for three years. The parties expected that Cadrillion, with Peters's help, would grow Legacy North Carolina's business and sell it in three to five years.

         In exchange for Legacy Georgia's assets, Cadrillion agreed to make two separate payments: first, $513, 000, which Cadrillion paid on the closing date of the Agreement, and second, a "Deferred Purchase Price, " which Cadrillion was to pay upon certain specified events, such as if Cadrillion sold Legacy North Carolina. In the event that Peters resigned from her position at Legacy North Carolina after her initial three-year term, but before Cadrillion was able to sell Legacy North Carolina, Cadrillion retained "the right, but not the obligation, " to "purchase . . . the rights to the Deferred Purchase Price." In other words, Cadrillion could choose to purchase Legacy Georgia's remaining interest in the value of Legacy North Carolina at that time. The Agreement called this "right" the "Call Option." To exercise this Call Option, Cadrillion had to provide "written notice to such effect" within 90 days of Peters's resignation. The Agreement included a complex formula to calculate the Deferred Purchase Price at the time Cadrillion exercised the Call Option, also known as the "Call Price."

         When Peters resigned after her three-year term but before Cadrillion could sell Legacy North Carolina, Cadrillion timely provided written notice that it was exercising the Call Option. However, Cadrillion did not pay the Call Price to Legacy Georgia as the Agreement required. Instead, Cadrillion filed a declaratory judgment action in federal court, seeking a declaration that the Call Price was no more than $460, 406, along with a motion to deposit that amount with the court. Plaintiffs countered that Cadrillion had incorrectly calculated the Call Price, and that depositing the funds with the court would not satisfy the Agreement. Cadrillion then decided to dismiss its action voluntarily, now taking the position that it had never exercised its Call Option in the first place.

         B.

         On April 14, 2015, Plaintiffs initiated this action against Cadrillion, Legacy North Carolina, and James Yuhas, a manager at Cadrillion. Plaintiffs asserted claims for breach of contract, conversion, abuse of process, and unfair and deceptive trade practices. The district court bifurcated the trial into a first trial on liability and compensatory damages, and a second trial on punitive damages.

         After Plaintiffs' presented their evidence, the court granted judgment as a matter of law to Defendants on the abuse of process claim. The jury returned a verdict finding Cadrillion liable for breach of contract and awarding $256, 500 in compensatory damages. The jury also found Cadrillion and Yuhas liable for conversion and awarded $1, 499, 999 in damages. The jury rejected Plaintiffs' claim of unfair and deceptive trade practices.

         A separate jury later awarded Peters $3 million in punitive damages: $2 million against Cadrillion, and $1 million against Yuhas. The jury did not award punitive damages to Legacy Georgia.

         Both sides filed post-trial motions. In response, the district court reduced the compensatory damages for conversion to $460, 406, eliminated compensatory damages for breach of contract as a double recovery, and reduced punitive damages to $1.38 million total. The court also granted Plaintiffs' request for pre- and post-judgment interest, and awarded Plaintiffs $743, 297 in attorneys' fees against Cadrillion.

         Cadrillion and Yuhas timely noted this appeal, challenging their liability for conversion, the jury's award of punitive damages, and the district court's award of attorneys' fees. However, Cadrillion now concedes its liability for breach of contract. See Appellants/Cross-Appellees Br. at 17. Plaintiffs cross-appeal, contending they are entitled to a new trial on breach of contract damages, that the district court erred in ruling against them on their abuse of process claim, and that they are entitled to judgment as a matter of law on their unfair and deceptive trade practices claim. The parties agree that North Carolina law governs this diversity case.

         II.

         We first address Cadrillion and Yuhas's challenge to ...


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