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Posts Tagged ‘Georgia Supreme Court’

Arbitration Clauses in Legal Engagements Are Not Per Se Void

Posted on: September 17th, 2020

By: Dana Maine

Joining with most other jurisdictions, the Georgia Supreme Court affirmed a Court of Appeals decision finding that arbitration clauses in attorney engagement agreements are not against public policy and clarified the burden of persuasion for demonstrating procedural unconscionability in Innovative Images, LLC v. James Darren Summerville, et al., (Sept. 8, 2020).  In reaching this decision, the Supreme Court disregarded the question of whether the attorney violated Georgia Rules of Professional Conduct 1.4(b), which is identical to ABA Model Rule of Professional conduct 1.4(b).  This rule states, “A lawyer shall explain a matter to the extent reasonably necessary to permit the client to make informed decisions regarding the representation.”  ABA’s Standing Committee on Ethics and Professional Responsibility has issued a formal opinion (02-425) which requires the attorney to fully apprise his/her client of the advantages and disadvantages of arbitration before asking the client to enter into an agreement requiring arbitration.  

The issue of violation of Rule 1.4(b) is a separate issue from whether the clause is enforceable, according to the Georgia Supreme Court.  Simply put, arbitration is favored in the State of Georgia and is not void as against public policy.  For the same reason, mandatory arbitration is not substantively unconscionable, leaving only the question of whether it is procedurally unconscionable.

In order for the clause to be procedurally unconscionable, it must be one “‘no sane [person] not acting under a delusion would make and that no honest [person] would take advantage of’ and ‘one where one of the parties takes a fraudulent advantage of the other.’” (Quoting NEC Technologies, Inc. v. Nelson, 267 Ga. 390 (1996)). Under the facts in the case, the only “evidence” to support unconscionability was the fact that defendants had not demonstrated that plaintiff was a sophisticated client.  The Georgia Supreme Court found error with the trial court’s shifting of the burden in this regard from plaintiff to defendant.  Thus, according to the Georgia Supreme Court, plaintiff had not met its burden and the arbitration clause was enforceable.

While the Georgia Supreme Court invited the State Bar to issue an advisory opinion on the topic, it made it unequivocally clear that any opinion would have no impact on the enforceability of an arbitration clause, and the clause would be enforced as long as the procedure for entering into the agreement was appropriate.  A practitioner should keep in mind the general rules that the client must be fully informed about the scope and effect of the arbitration clause, and the lawyer’s liability cannot be limited by referral of the dispute to arbitration.  In the end, arbitration can benefit both parties by bringing any dispute to a speedy and cost-effective conclusion.   

If you have any questions or would like more information, please contact Dana Maine at [email protected], or any other member of our Lawyers Professional Liability Practice Group, a list of which can be found at www.fmglaw.com.

Is It a New World for Punitive Damages in Georgia?

Posted on: August 5th, 2020

By: Aaron Miller

The Georgia Supreme Court recently decided a punitive damages issue that could have far-reaching impact on tort cases. In Reid v. Morris, 2020 GA. Lexis 472 (2020), the Court decided whether an individual that simply loans a car can be an “active tort-feasor” for purposes of awarding punitive damages if the intoxicated driver later causes an accident.   

The facts are unusual for a negligent entrustment case, because the loaner had been drinking with the driver and knew the driver was intoxicated, unlicensed and had a habit of engaging in reckless conduct. At the bench trial, the loaner was found liable by summary judgment and the driver by default. The trial court determined that both defendants were liable for punitive damages, but the judge concluded the award against the loaner was not allowed even though his conduct satisfied the punitive damages standard. In doing so, it relied upon OCGA 51-12-5.1 (Georgia’s punitive damages statue) and prior case law, which held that, in cases involving DUI, only the drunk driver can be considered the active tort-feasor for purposes of awarding punitive damages. In reversing, the Court noted that, while O.C.G.A 51-12-5.1 does not define the term “active tort-feasor,” the statute does make a distinction between tort defendants who “acted” and those who “failed to act.” The Court found that the text suggests that an “active tort-feasor” is a defendant who engages in an affirmative act of negligence or other tortious conduct, as opposed to a defendant whose negligence consists of an omission to act when he is under a legal duty to act. Thus, in determining whether uncapped punitive damages are available against a defendant like the loaner, the question is not whether he was the drunk driver, but whether he was intoxicated to the degree that his judgment was substantially impaired and whether his conduct was a proximate cause of the plaintiff’s injury. Based on the unusual facts, the Court found that the loaner possibly met this definition, and remanded the case for further consideration because whether negligence is active or passive is a question of fact.

This new standard set by the Court allowing punitive damages against an individual for merely allowing an intoxicated individual to drive his vehicle could now open up a proverbial flood gate of punitive damage claims. Only time will tell the extent to which this ruling is broadened to encompass additional “passive” acts that may be susceptible to punitive damages.

If you have questions or would like more information, please contact Aaron Miller at [email protected].

Assumption of the Risk in Georgia – Is “Common Sense” Finally the New Standard?

Posted on: June 4th, 2020

By: Aaron Miller and Wayne Melnick

Assumption of the risk is an important affirmative defense for defense attorneys.  Typically, in order to receive a jury charge for assumption of the risk, defense attorneys must demonstrate the plaintiff him/herself actually knew of the specific harm that could result from participating in the activity.  Many a case has seen that defense barred when the plaintiff simply said (s)he had “no idea” that the specific bad thing that happened to them could happen.  On Monday, June 1, 2020, the Georgia Supreme Court broadened the use of an assumption of the risk defense, affirming that the use of an “objective common-sense” standard is enough to allow a jury instruction on assumption of the risk.

In Daly et al. v. Berryhill et al., Plaintiff Berryhill treated at a local clinic for chest pain and high blood pressure.  Due to his condition, the local physician referred Berryhill to Dr. Daly.  Dr. Daly performed tests which indicated that Berryhill suffered from low blood flow and instructed Berryhill to continue taking blood pressure medication, as well as anti-blood clotting medication and medication to treat high cholesterol and blood pressure.  Dr. Daly warned Berryhill of the possible side effect of dizziness during strenuous activities, however, the doctor did not specifically warn plaintiff against participating in any specific activities.  The following day, Dr. Daly performed a cardiac catheter procedure revealing a 99% blocked artery and performed a balloon angioplasty with a stent.  The operation was a success, and Berryhill was instructed not to engage in any strenuous activity.

Within a week of his discharge, Berryhill went on a hunting trip.  As part of this trip, Berryhill walked 200 yards through rough terrain while carrying a nine-pound rifle and climbing up an 18-foot deer stand.  Once atop the deer stand, Berryhill fainted, falling from the deer stand and fractured several vertebrae.  Berryhill filed a lawsuit against Dr. Daly, alleging that Dr. Daly prescribed too much blood pressure medication.  Over objection from the plaintiff’s counsel, the Court charged the jury on assumption of the risk.  Subsequently, the jury found for Dr. Daly.

On appeal, the Georgia Supreme Court rejected Berryhill’s argument that Dr. Daly never advised Berryhill to specifically avoid hunting.  However, the Supreme Court determined that an objective common-sense standard was appropriate in assessing whether a plaintiff had knowledge of a risk.  Here, the Court ruled that “even though Dr. Daly did not explain all specific risks that could have resulted from disregarding those instructions, a competent adult like Berryhill cannot blind himself to the obvious risk of a dangerous cardiovascular event…”.  In doing so, the Court ruled that there was at least slight evidence that Berryhill knew his hunting trip posed a risk to himself and affirmed the defense verdict, holding that the trial court did not err in giving the requested jury instruction for assumption of the risk.

This ruling broadens the cases for which an assumption of the risk charge would be beneficial.  In order to take advantage of this defense, it is not necessary to specifically cite activities which could be dangerous to a participant; instead a general warning may enough, and the onus falls on the plaintiff to use their common sense to determine if the activity poses a risk to themselves.  It remains to be seen if this indicates the Court is moving toward removing the “subjective knowledge of a specific risk” and replacing it entirely with the objective common-sense standard applied in this case, but the ruling appears to open the door for it.

If you would like a copy of this case or would like more information, please contact Aaron Miller at [email protected] or Wayne Melnick at [email protected].

Georgia Supreme Court Overrules Precedent on Attorney’s Fees for Counterclaimants

Posted on: April 8th, 2020

By: Jake Carroll

Georgia law permits the award of attorney’s fees to a claimant where the party defending the claim has “acted in bad faith” in making the contract, has been stubbornly litigious, or has caused the plaintiff unnecessary trouble and expense. O.C.G.A. § 13-6-11. The “bad faith” refers to bad faith in the making or performance of the contract, and may exist whether or not there is a bona fide controversy otherwise existing between the parties.  Thus, “bad faith” relates to the making or performance of the contract and not the conduct of the litigation. The terms “stubbornly litigious” and “unnecessary trouble and expense” relate to the conduct of the litigation and may be found to exist where there is a lack of bona fide controversy.

Both the Georgia Supreme Court and Court of Appeals have repeatedly held that “the award of expenses of litigation under O.C.G.A. § 13-6-11 can only be recovered by the plaintiff in an action under the language of the statute; therefore, the defendant and plaintiff-in-counterclaim cannot recover such damages where there is a compulsory counterclaim.”[1]

However, the decision in SRM v. Travelers overrules prior holdings, and allows a counterclaimant to recover attorney’s fees under O.C.G.A. § 13-6-11, regardless of whether the counterclaim is independent of the plaintiffs claim.

In light of the Travelers decision, claimants should evaluate the potential risk of claims for attorney’s fees from their counterclaimants. In commercial and construction contract disputes, the Travelers decision impacts risk for counterclaims of attorney’s fees based on a claimant’s conduct during litigation, as well as bad faith in making or performing the underlying contract.

For Georgia insurers, this ruling does not call into question the status of Georgia’s insurance bad faith statute, O.C.G.A. § 33-4-6, which is the exclusive remedy for and insurer’s refusal to pay a “covered loss.” Although the claims at issue in SRM were against an insurance company, they involved the calculation of premium as opposed to a coverage issue within the purview of Section 33-4-6. Be sure to follow FMG’s Insurance Coverage and Bad Faith BlogLine for analysis of current state-wide and national trends in insurance litigation.

If you have questions regarding this decision, or any other construction or commercial contract questions, Jake Carroll practices construction and commercial law as a member of Freeman Mathis & Gary’s Construction Law, Commercial Litigation, and Tort and Catastrophic Loss practice groups. Mr. Carroll represents business and commercial entities in a wide range of disputes and corporate matters involving breach of contract and warranty claims, business torts, and products liability claims. He is available at [email protected].


[1] See Byers v. McGuire Properties, Inc., 679 S.E.2d 1 (Ga. 2009); Graybill v. Attaway Constr. & Assocs., 802 S.E.2d 91 (Ga. Ct. App. 2017) (attorney’s fees not permitted on compulsory counterclaim);Singh v. Sterling United, Inc., 756 S.E.2d 728 (Ga. Ct. App. 2014); Sanders v. Brown, 571 S.E.2d 532 (Ga. Ct. App. 2002).

Georgia High Court to Rule on Damages Required for Data Breach Claims

Posted on: September 3rd, 2019

By: Amy Bender

The Georgia Supreme Court soon will weigh in on the ongoing debate within the courts of when individuals may bring claims based on data breaches involving their personal information when they have not suffered any actual financial harm.

In what is now, however unfortunate, a familiar story, the plaintiffs in Collins et al. v. Athens Orthopedic Clinic, P.A. were patients at a medical clinic that experienced a ransomware attack that provided the hacker access to their personal information stored on the clinic’s computer database, such as their Social Security number, date of birth, and medical history. The hacker then posted the information on the Dark Web and another website. The clinic did not provide credit monitoring, identity theft protection, or other remedies to its victim patients, which the patients then had to purchase themselves. One of the plaintiffs also experienced fraudulent credit card charges, although she actually did not allege those changes were the result of the clinic’s data breach.

Instead of claiming any violation of a data breach statute, the plaintiffs brought claims under Georgia state law for negligence, breach of contract, unjust enrichment, declaratory judgment, Georgia Uniform Deceptive Trade Practices Act, and attorney’s fees. The trial court dismissed the claims before trial, and the Georgia Court of Appeals agreed, finding measures such as credit monitoring and identity theft protection and their associated costs, which are designed to prevent exposure to future, speculative harm, were not sufficient proof of the damages required to establish any of their claims.

The Georgia Supreme Court agreed to review the case and recently heard oral argument. A decision is expected within the next few months. At oral argument, some of the justices seemed skeptical of the lower courts’ rulings and the argument that the plaintiffs needed to wait until they had been victimized by identity fraud before they could file suit. However, no ruling has been made yet.

Courts around the country have taken differing views on whether the mere exposure of personal information, without more, is enough to be considered “damages” or if the plaintiff must prove additional financial harm. (See our related blog posts here, here, and here.) The upcoming Georgia Supreme Court decision hopefully will shed light on this issue and serve as a helpful guide for both organizations and individuals, at least within the State of Georgia.

Another takeaway from this case is that it usually is prudent for an organization that has experienced a data breach exposing personal information of its patients or clientele to bear the cost of credit monitoring and identity theft services, in addition to implementing strong data security measures that may prevent such an attack from occurring in the first place. Indeed, although not mandatory in Georgia and most other states, a handful of other states do require that these services be offered to affected individuals at no cost when they are notified of a data breach. Although these costs can be high, they can be covered by the organization’s cyber liability insurance policy and likely pale in comparison to the time and money the organization may spend defending a lawsuit arising out of the breach.

For more information or for assistance with data security or response measures, contact FMG’s Data Security, Privacy & Technology team.