# FILED

June 22, 1998 Cecil Crowson, Jr. Appellate C ourt Clerk IN THE SUPREME COURT OF TENNESSEE AT JACKSON

FOR PUBLICA TION Filed: June 22, 1998 BILLIE J. METCALFE, ) JULIA M. METCALFE, and ) JOHNNY D. METCALFE, ) SHELBY CIRCUIT ) Plaintiffs/Appellants, ) ) Vs. ) ) HON. J. STEVEN STAFFORD, ) JUDGE ) LARRY J. WATERS, ) ) Defendant, ) ) and ) ) CHARLES W. PRUITT, ) ) No. 02S01-9704-CV-00027 Defendant/Appellee. )

For Appellant

s Metcalfe: For Appellee, Charles W. Pruitt: R. Sadler Bailey Robert C. Rosenbush C. Philip M. Campbell Millington, Tennessee BAILEY & CLARKE Memphis, Tennessee

For Defendant, Larr

y J. Waters: Paul E. Lewis Millington, Tennessee



## O P I N I O N

COURT OF APPEALS AFFIRMED IN PART AND REVERSED IN PART; REMANDED TO TRIAL COURT ANDERSON, C.J.-2- We granted this appeal to dete rmine whether the Court of Appeals erred in reversing the jury’s verdict awarding punitive damages in this legal malpractice action. The appeals court held that punitive damages w ere improper because the defendant’s malpractice did not co nstitute intentional, fraudulent,malicious or reckless conduct and because the defenda nt’s efforts to conceal his actions were not contemporaneous with his malpractice. The court affirmed the jury’s verdict as to liability, but reversed the jury’s verdict as to compensatory damages because it was excessive.

After our review of the r ecord and applicable authorit y, we hold that as to punitive damages, the evidence supported a finding that the de fendant engaged in intentional, fraudulent, malici ous, or reckless conduct and that there is no requirement that a defendant’s attempt s to lie about or conceal his conduct must be contemporaneous with the underlying malpractice. The judgment o f the Court of Appe als is the refore re versed in p art and th e jury’s verd ict as to p unitive damages is reinstated. The cas e is remanded to the trial co urt for a new trial solely on the issue of compensa tory damages for the reasons expressed by the Court of Appeals.

BACKGROUND In September of 1986, the plaintiff, Billi e Metcalfe, was a passeng er in a car that was involve

d in a head-on collision w ith another automobile. Metcal fe, who was age 16 at the time, suffered a broken leg, a concussion , facial cuts, and had to have a pin surgically placed in her hip. She spent thirteen days in the hospital.

The plaintiff and her parents, Julia and Johnny Metcalfe, later hi red the defendant, Larry Waters, to represent them in connection with the acci dent. In September of 1987, W aters filed a complaint against the driver of the vehicle Billie Metcalfe had been riding in,the driver’s parents , and several other defendants.1 The complaint also named Charles Pruit t and the l aw office of Pruitt & Waters as defendants based on theories of r espondeat superi or and partner ship li ability. The jury foundthat Pruitt and Waters w ere partners and that both were jointly and severally liable for the comp ensatory dam age s. Th ese issue s are not b efor e us in this a ppe al. -3- The complaint was non-suited by Waters on March 15, 1990, because Waters was not prepared on the day of trial . The complaint was re-fil ed on March 6, 1991; however, Waters did not pay the filing fee, nor did he properly issue summons.

The complaint was dismissed by the trial court against some of the defendants in December of 1992, due to the ex piration of the statute of limitati ons. It was dismissed as to the remaining defendants on May 14, 1993, when W aters failed to appear for the trial. Waters lied to the plaintiffs about the status of the case for several months, tel ling them that it was still pending even tho ugh he knew it had been dismissed. When he finally informed the Metcalfes that the case had been dismissed, he did not state the reason fo r the dismissal but nevertheless told them it was not worth appealing.

The Metcalfes initiated a legal malpractice suit against W aters. 1 In his amended answer to the complaint and in his testimony, Waters admitted that he failed to apprise the plaintiffs of the status of their case, failed to adequately prepare for trial, failed to refile the suit properly after taking a non-suit, f ailed to file summons properly, failed to appe ar the second time the case w as set for trial, and failed to file a notice of appeal on beh alf of the plaintiffs. W aters conceded that his failure to inform the plaintiffs that the case had been dismissed was an intentional, fraudulent, malicious, or reckless effort to conce al his mistakes. He nonetheless denied that punitive damages were warranted.

At trial, t he trial co urt direct ed a verdic t for the plaintif fs on lia bility. Th e jury, having been instructed on the law, returned a verdict that included $100,000 in punitive damages agains t Waters. In approving the verdi ct, the trial court found-4-

that “the conduct of the defendant Waters in not keeping the plaintiffs informed about the status of their case and of l ying to the plaintiffs about the dismissal is the gravamen of the punitive damage award.” The trial court also stressed that W aters “did not take any action to set aside the dismissal of the case or to protect h is clients’ interests after the case was dismissed.”

In reversing the trial court, the Court of Appeals found that W aters’ malpractice amounted to negli gent conduct and not intentional , fraudulent, malicious or reckless

conduct. Although the inter mediate court also found that the defendant’s effort to conceal his malprac tice was “egreg ious,” it could not serv e as the basis for punitive damages:

[A]n award of punitive damages must be made on the basis of the same conduct that wa rrants an award of compensatory damages. In the case before us, compensatory damages wer e awarded for the negligent conduct of Waters in allowing the dis missal of the underlying case. Subs equent to this negligent conduct, Waters committed the egregious act of ly ing to the Metcalf es about the dismi ssal of t he case. Certainly, his conduct after the dismissal of the case cannot be condoned, but at the same time it is conduct that was not included in the negligent act or acts that resulted in the award of compensatory damages.

We granted the plaintiffs’ application for permi ssion to appeal.

ANAL YSIS This Court historically has recognized that “in an action of trespass the jury [is] not restrained, in their assessment of damages, to the amount of the mere pecuniary loss sustai ned by the plaintiff, but may award damages i n respect of the malicious conduct of the defendant, and the d egree of insult with w hich the trespass had been attended .” Wilkins v. Gilmore , 21 Tenn. 140 (1840)(emphasis added). The purpose of such damages i s not to compensate the plaintiff but to punish the wrongdoer for conduct that is egregi ous and to deter others from-5-

engaging in similar

conduct. Huckeby v. Spangler , 563 S.W.2d 555, 558 (Tenn. 1978).

In Hodges v. S. C. Toof & Co. , 833 S.W.2d 896 (Tenn. 1992), we traced the history of our case law and determined that punitive damages are only available where a defendant has acted either intentionally, fraudulentl y, maliciously or recklessly. We explained:

A person acts intentionally when it is the person’s conscious objective or desire to engage in the conduct or cause the result. A per son acts fraudulently w hen (1) the person inte ntionally misrep resents an existin g, material fact or produces a false impression, in order to mislead another or to obtain an u ndue advantage, and (2) another is injured because of reasonable reliance upon that representation. A person acts maliciously when the person is motiv ated by ill will , hatred, or personal spite. A person ac ts recklessly w

hen the person is aware of, but cons ciously disregar

ds, a substantial and unjustifiable r isk of such a nature that its disregard constitutes a gross deviati on from the standard of care that an ordinary person would exercise under all the circumstances.

Id . at 901 (citations omitted)

.

To achieve the twin purp oses of punishment and deterrence, the defendant’s conduct must be establish ed by “clear and conv incing” evidence. In determining liability

for punitive damages, ev idence of the defendant’s financial condition is inadmissibl e. Id . In determining the amount of punitive damages, the following factors may be considered in a separate, bi furcated proceeding: the defendant’s financial condition and net worth; the nature and repr ehensibility of the defendant’s conduct; the impact of the defendant’s conduct on the plaintiff; the relationship of the defendant to the plai ntiff; the defendant’s awareness of the harm and motivation in causing the harm; the duration of th e defendant’s misconduct and whether the defendant attempted to con ceal the conduct ; the expense the plaintiff has incur red in recovering any losses; whether the defendant2 See , e.g. , Hyatt Regency v.Winston & Stra wn , 907 P.2d 506, 518 (Ariz . Ct. App. 1995) (“aggra vated or o utrageo us con duct”); Orsini v. Larry Moye r Trucking, I nc. , 833 S. W.2d 366, 36 8 (Ark. 1992)(w anton c onduc t; consc ious indiffe rence; m alice); Miller v. Byrne , 916 P.2d 566, 580 (Colo. C t. App. 19 95)(“willful an d wanto n”); Ray-Mar Beauty College, Inc. v. Elli s Rubin Law Offices , 475 So.2d 718, 719 (Fla. Dist. C t. App. 198 5)(“gros s ma lpractice”); Hous ton v. Surr ett , 474 S.E.2d 3 9, 41 (Ga. Ct. App . 1996)(“w illful miscon duct, m alice, fraud , wanton ness, o ppress ion”); Fitzger ald v. Walker , 826 -6- profited from the conduct, and if so, whether damages in excess of the profit are necessary to deter future c onduct; whether the defendant has been subjected to previous punitive damage awards based upon the same wrongful act; and whether the defendant made any effort to take remedial action or to offer a fair and prompt settlement for the actual harm cause d. Id . at 901-902 (emphasis added).

In the present case, the Court of Appeals reversed the jur y’s award of punitive damages, finding that Waters’ malpractice amounted to negli gence and not intentional, fraudulent, malic ious, or reckless conduc t. The court further stated that Wa ters’ conduct in concealing and lyin g about his malpr actice, althou gh “egregious,” w

as not contemporaneous with th e underlying malpractice and was therefore, under Hodges , relevant only to the amount of, but not the liability for, punitive damages. We disagree with both conclusions.

A majority of jurisdic

tions have recogniz

ed that punitive damages may be proper in a legal malpra ctice case. Annotation, Allowance of Punitive Damages Against Attorney For Malpractice , 13 A.L.R. 4th 95 (1982 & Supp. 1997) ; see also Elliott v. Videan , 791 P.2 d 639, 64 4 (Ariz. Ct. App. 198 9)(“puni tive dama ges have historically been awarded against attorneys for legal malpractice”). As in any case involving puniti

ve damages, however, the plaintiff must prove that th e defendant engaged in the requisi

te culpable conduct. The Alabama Supr eme Court has said, for instance, that “some show ing of fraudulent, malicious, w illful, wanton, or reckless b ehavior or inaction must be m ade to su pport a cl aim for p unitive damages in a legal malpractice case.” Boros v. Baxley, 621 So.2d 240, 245 (Ala. 1993). Other courts have used similar terms in des cribing the culpable co nduct for an award of punitive damag es in a legal malpracti ce case. 2P.2d 13 01, 1305 (Idaho 1 992)(“e xtrem e deviation from reason able stan dards o f condu ct”); Belford v. McHale, Cook & Welch , 648 N.E.2d 1241,1245 (Ind. Ct. App. 1995) (“malice, f raud, gross negl igence, or oppre ssivene ss”); McAlister v. Slosberg , 658 A.2d 658 (M e. 1995) (ma lice); Gautam v. DeLuca , 521 A.2d 13 43, 1347 (N.J. Su per. 198 7)(wan ton, reck less or m alice; cons cious w rongdo ing); but see Cripe v. Leit er , 683 N.E.2d 516 ( Ill . App. Ct. 1997)(discussi ng statute which precl uded puniti ve damages for attorney m alpractice ). -7- We join these jurisdictions in recog nizing that punitiv e damages may be awarded in a legal malpractice claim, provided the culpable conduct established in Hodges , supra , i.e., intentional, fraudulent,malicious, or reckles s, is proven by clear and convincing

evidence. In this regard, we disagree w ith the intermediate court’s conclusion that Waters’ conduct was merely negli gent. In addition to failing to prosecute the Metcalfes’ cl aim, Waters’ failed to keep them informed about the status of their lawsuit,failed to prepare when the ca se was set for trial, failed to refile the case properly after taking a nonsuit, failed to p ay the filing fee, failed to issue summons properly, fail ed to appear when the case w as set a second time for trial, failed to file a notic e of appeal, and failed to take any ac tions in an effort to preserve the Metcalfes’ right of appeal. Given Waters’ repeate d transgressions and callous disregard for the rights of his clients, there was overwhelming evidence from which the jury could find, at a minimum, reckless conduct, that is, con duct constituting a gross

deviation from the applicabl e standard of care. See , e.g. , Patrick v. Ronald Williams P.A. , 402 S.E.2d 452, 460 (N.C. Ct.App. 1991)(“repeated course of conduct which constituted a cal lous or intentional indifference to the plaintiff’s rights” stated a claim for punitive damages).

We also disagree with the conclusi on that punitive damages w ere improper because Waters’ malpractice was not c ontemporaneous with his efforts t o lie about and conceal his wrongdoing. Although the Cour t of Appeals correctly obs erved that the concealment of wrongdoi ng is listed among the factor s in Hodgesthat may be considered in determining the amount of punitive damages, nothing in Hodges precludes the factor from being considered with regard to a defen dant’s liability for punitive damages. Indeed, other factors listed among thos e for consideration with respect to the amount of punitive damages are also necessari ly considered with-8-

respect to the threshold li ability issue; for ins tance, the “nature and reprehens ibility of the defendant’s wrongdoing.” Hodges , 833 S.W.2d at 901. A close reading of Hodges , in fact, indicates that only evidence of a defendant’s net wor th or financial conditio n is deem ed inadm issible in determin ing a def endant’ s liabilit y for puni tive damages. Id . at 901-902.

Finally, we beli eve that limiting cons ideration of a defendant’s efforts to conceal his or her wro ngdoing is inconsis tent with t he purpo se of pun itive damages: to punish egregi ous acts and deter others from committing the same or similar acts. As other courts have recogniz ed, an attorney’s concealment of wrongdoing and/or mi srepresentations affecting the c lient’s case relate dir

ectly to the punitive damages iss ue. See , e.g. , Houston v. Surrett , 474 S.E.2d 39, 41 (Ga. Ct. App. 1996) (“an attorney’s concealment and misrepresentat ion of matters affecting his client’s cas e will give r

ise to a claim for punitiv e damages.”); Asphalt Engineers, Inc. v. Gal usha , 770 P.2d 1180 (Ariz. Ct. App. 1989)(“the record also supports an inference that [the atto rney] attempted to cover up his misconduct.”). In sum, the harm resulting fr om the original wrongdoing, as in the present ca se, may be exacerbated by i ntentional, fraudulent, malicious , or reckless efforts that prevent the plaintiff from taking immediate corrective ac tion.

CONCLUSION We have concluded that the Court of Appeals erred in reversing the jury’s verdict awarding

punitive damages. There w as clear and convincing evidence of intentional, fraudulent, malici ous, or reckless conduct on the part of Waters, and there is no requirement th at attempts to conceal be contemporaneo us with the original wrongdoing. The judgment of the Court of Appeals is therefore reversed in part and the jury’s verdict as to punitive damages is reinstated. The case is remanded to the trial court for a new trial solely on the issue of compensato ry-9-

damages. Costs of this appeal are taxed to the defen dant/appellee, Larry Waters, for which execution may issue i f necess ary.

_________________________________ RILEY ANDERSON, Chief Justice

Concur: Drowota, Birch, and Holder, JJ. Reid, Sp.J.