Davis et al v. White et al

Filing 237

MEMORANDUM OF OPINION AND ORDER - Before the Court is Defendants' Motion for Remittitur in the combines cases, consisting of the Davis, Sloane, and Lawrence Plaintiffs. Upon consideration, and for the reasons set forth herein, the motion is due to be denied. Given that neither the Gore factors nor Hammond/Green Oil factors weigh in favor of remittitur, the Court sustains the award of punitive damages against Defendants. Further, as to Defendants SERMA, Builder1, and Eco-Prese rvation LLC, the small business cap § 6-11-21(c) does not bar the current amount in punitive damages. Defendants' net worth exceeds $2,000,000 under the appropriate calculation, and Defendants are not small businesses. Defendants' Motion for Remittitur and Motion to Strike is DENIED. The case is ORDERED to remain closed. Signed by Judge L Scott Coogler on 8/3/2022. (MEB2)

FILED
2022 Aug-03 PM 02:34
U.S. DISTRICT COURT
N.D. OF ALABAMA

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA

LINDSAY DAVIS,
BENJAMIN DAVIS,
Plaintiffs,
v.
J. MICHAEL WHITE, et al.,
Defendants.

NICOLE SLONE and
JONATHAN SLONE,
Plaintiffs,
v.
J. MICHAEL WHITE, et al.,
Defendants.
MONICA LAWRENCE and
JOHN LAWRENCE,
Plaintiffs,
v.
J. MICHAEL WHITE, et al.,
Defendants

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7:17-cv-01533-LSC

7:17-cv-01534-LSC

7:17-cv-01535-LSC

MEMORANDUM OF OPINION AND ORDER
Before the Court is Defendants' Motion for Remittitur in the combined cases,
consisting of the Davis, Sloane, and Lawrence Plaintiffs. Defendants submitted a
Motion for Remittitur on May 5, 2022, and Plaintiffs submitted their responses on
May 13, 2022. (Doc. 231 and Doc. 234). Upon consideration, and for the reasons set
forth herein, the motion is due to be denied.
I.

STANDARD OF REVIEW
In the Eleventh Circuit, a court may order remittitur and reduce the punitive

damages awarded by the jury. The remedy for a damages award that is "outside the
bounds of evidence is for the 'district court [to] reduce the award to the maximum
amount established by the evidence.'" Hicks v. City of Tuscaloosa, 2016 WL 1180119,
at *7 (N.D. Ala., 2016) (quoting Rodriguez v. Farm Stores Grocery, Inc., 518 F.3d 1259,
1268 (11th Cir. 2008); Sand v. Kawasaki Motors Corp. U.S.A., 513 Fed. Appx. 847,
855 (11th Cir. 2013) ("In general, a remittitur order reducing a jury's award to the
outer limit of the proof is the appropriate remedy where the jury's damage award
exceeds the amount established by the evidence.”) (quoting Goldstein v. Manhattan
Industries, Inc., 758 F.2d 1435, 1448 (11th Cir. 1985)). Therefore, if legal error is
detected in an award of damages, a court may opt for remittitur to remedy instead of
granting a new trial.

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II.

ANALYSIS
The punitive damages for each claim that Defendants address in their Motion

are as follows. The Sloane Plaintiffs were awarded $1.00 in nominal damages and
$30,000.00 in punitive damages on their Trespass claim; $1.00 in nominal damages
and $105,500.00 in punitive damages on their Private Nuisance claim; $1.00 in
nominal damages and $665,000.00 in punitive damages on their Deprivation of
property rights claim; and $100,000.00 in compensatory damages and $500,000.00
in punitive damages on their Outrage claim. The jury awarded the Davis Plaintiffs
$1.00 in nominal damages and $375,000.00 in punitive damages on their §1983
claim; $1.00 in nominal damages and $30,000.00 on their Trespass claim; and
$100,000 in compensatory damages and $1,000,000.00 in punitive damages on their
Outrage claim. The jury awarded the Lawrence Plaintiffs $1.00 in nominal damages
and $450,000.00 in punitive damages on their §1983 claim; $1.00 in nominal
damages and $30,000.00 on their Trespass claim; $1.00 in nominal damages and
$5,500.00 in punitive damages for their Private Nuisance claim: $1.00 in nominal
damages and $702,000.00 in punitive damages on their Deprivation of Property
Rights claim; and $100,000.00 in compensatory damages and $500,000.00 in
punitive damages on their Outrage claim.

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There are three issues for the Court to determine: (1) whether the punitive
damages for the federal claims are excessive under the Gore and State Farm factors;
(2) whether the punitive damages for the state law claims are excessive under both
Gore/State Farm and the Hammond/Green Oil factors; and (3) whether Defendants'
businesses are small businesses under Ala. Code § 6-11-21(c).
A. Punitive Damages Under Federal Law
Excessive punitive damage awards against a tortfeasor for violations of state law
violate the Due Process Clause under the Fourteenth Amendment and excessive
punitive damages for violations of federal law violate the Due Process Clause under
the Fifth Amendment. When considering the amount of punitive damages, the
Supreme Court's factors in Gore and State Farm apply. Those factors examine: (1)
the degree of reprehensibility of the defendant's misconduct; (2) the disparity
between the actual or potential harm suffered by the plaintiff and the punitive
damages award; and (3) the difference between the punitive damages awarded by the
jury and the civil penalties authorized or imposed in comparable cases. State Farm
Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 418 (2003). Because all federal and
state claims arise from the same actions by Defendants, the Court will analyze the
factors for all claims together when appropriate.
1. Degree of Reprehensibility

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The first factor, reprehensibility, is the most important factor when
determining if the amount of punitive damages violated due process concerns. BMW
of North America v. Gore, 517 U.S. 559 (1996). Here, Defendants ask this Court to
interpret such a requirement very narrowly, asking for a showing of "intentional
malice, trickery, [or] deceit." (Doc. 199.) Defendants also state that due to the lack
of multiple incidents per Plaintiff, Defendants' actions are not reprehensible. The
Court disagrees. The 11th Circuit recognizes a broader definition of reprehensibility,
considering factors such as whether the conduct evinced an indifference to or a
reckless disregard for the health or safety of others, as well as whether the target of
the conduct was financially vulnerable. Goldsmith v. Baby Elevator Co., Inc., 513 F.3d
1261, 1283 (11th Cir. 2008).
Defendants’ actions were nothing but reprehensible. Defendants’ actions had
serious, lingering effects on Plaintiffs. Defendants' actions prevented Plaintiffs from
accessing essential utilities without regard for Plaintiffs’ due process rights.
Defendants cut off Plaintiffs’ utilities to strong arm payment of clearly invalid
charges. Defendants insisted on ignoring partial payments and accruing an excessive
sum. And Defendants threatened foreclosure and criminal prosecution if Plaintiffs
did not pay the unsupportable and excessive fees. As a result, Plaintiffs suffered
serious harm. Considering the amount of the invalid charges levied by the defendants

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and the financial position of Plaintiffs, Defendants' suggestion that this conduct did
not affect financially vulnerable targets is clearly misplaced. The factors in Goldsmith
regarding reprehensibility confirm the punitive damages are not excessive.
2. Proportionality
a) Proportionality of Federal Claims
When determining whether an award of damages is excessive, the court should
also look to the proportionality of the awarded damages to the amount of harm. Gore,
517 U.S., at 575. When making this comparison, the Court should compare the
amount of awarded damages to the actual harm that has occurred, not necessarily
compare the awarded compensatory damages to the amount of awarded punitive
damages. SE Prop. Holdings, LLC v. Judkins, 822 F. App'x 929, 937 (11th Cir. 2020).
For the 1983 claims, this analysis is the most rational approach, even though
Defendants ask the Court to compare the punitive damages to the awarded nominal
damages. Such comparison results in a ratio of 375,000:1 and 450,000:1 for each
Defendant. (Doc. 231). That approach misconstrues the Gore factor. The 11th
Circuit has not specifically addressed whether the Court should compare punitive
damages to nominal damages like Defendants propose. However, in Kemp, the 11th
Circuit allowed a 23:1 ratio to stand, stating that a court should not rigidly rely on the
ratio when reliance on the ratio would subvert traditional purposes of punitive

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damages. Kemp v. Am. Tel. & Tel. Co., 393 F.3d 1354, 1364–65 (11th Cir. 2004).
Further, sound logic and the disapproval of Defendants’ theory in Alabama state
courts as well as the 2nd, 3rd, 4th, 5th, 6th, and 9th Circuits suggests that
Defendant's argument is misplaced. Tanner v. Ebbole, 88 So. 3d 856, 876 (Ala. Civ.
App. 2011); Patterson v. Balsamico, 440 F.3d 104, 121 (2d Cir. 2006); Jester v. Hutt,
937 F.3d 233, 242 (3d Cir. 2019); Saunders v. Branch Banking and Tr. Co. Of VA, 526
F.3d 142 (4th Cir. 2008); Williams v. Kaufman Cnty., 352 F.3d 994 (5th Cir. 2003);
Romanski v. Detroit Ent., L.L.C., 428 F.3d 629 (6th Cir. 2005); Arizona v. ASARCO
LLC, 773 F.3d 1050 (9th Cir. 2014).
As the Gore and Judkins courts discussed, a better measurement would be the
actual harm suffered by Plaintiffs. Here, when compared to the amount that
Defendants claimed Davis and Lawrence owed, the ratio becomes a multiple of 2.82
for the Davises ($133,085.68 to $375,000) and 2.72 for the Lawrences ($165,502.94
to $450,000), both of which are well within the Gore guideposts. (Doc 208). As
Plaintiffs point out, the excessive charges and collection tactics form the basis of the
suit, both of which resulted in the 1983 claims. (Id.) Regardless of how one measures
the actual harm suffered by Plaintiffs, the Court finds that the punitive damages are
proportional.
b) Proportionality of State Law Claims

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All punitive damages awarded for Plaintiffs’ state law claims are proportional.
For the Outrage claims, the only claim where compensatory damages were awarded,
the compensatory-punitive damages were 10:1 for the Davises and 5:1 for the Slones
and Lawrences. Defendant concedes that the ratios for the Outrage claims are not
grossly disproportionate. (Doc. 231 at 4 n. 1 (“The ratios range in grossly
disproportionate numbers in all claims with the exception of the Outrage claim . . .
.”))
For Plaintiffs’ Trespass, Private Nuisance, and Deprivation of Property Right
claims, Defendants argue that the punitive damages were grossly disproportionate
because the jury only awarded $1 in nominal damages. For the reasons discussed
above as to the federal law claims, the Court finds the punitive damages awarded for
the state law claims to be proportional. When looking at the amount Defendants
alleged each Plaintiff owed and the reprehensible actions of Defendants, the amount
given for each claim to each plaintiff is proportional for the state law claims.
3. Comparing Civil Penalties
The third factor instructs the Court to analyze the difference between the
punitive damages awarded by the jury and the civil penalties authorized or imposed
in comparable cases. Here, Plaintiff concedes that there is no law providing for the
imposition of civil or criminal penalties for the conduct at issue. As a result, this

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factor seems to weigh in favor of Defendants. However, the circumstances of this
case are unique. Here, Defendants positioned themselves in the roll of a government
entity—except a government entity would be regulated by ordinances or statutes and
thus prevented from imposing clearly outrageous rates and fees. A government
regulated utility would also be required to provide Plaintiffs due process. Instead,
Defendants utilized unbridled authority to ravage the Plaintiffs, stripping them of
basic rights with no due process. There is no comparable civil or criminal penalty
because most, if not all, other utility companies would be prevented from acting in
such a manner. These Defendants’ actions were completely unchecked, and as such,
this factor does not signal for a reduction in the jury’s award of damages.
Even if this factor favored a reduction, one factor weighing in favor of a
reduction when the other factors weigh against it is not enough to overturn the jury’s
award of punitive damages. There is no reason to reduce the punitive damages.
B. Punitive Damages Under Alabama Law
Alabama caps punitive damages at the greater of either three times
compensatory damages or five hundred thousand dollars. Ala. Code § 6-11-21(a).
Here, no Plaintiff received more than $500,000 in punitive damages per claim from
any Defendant; therefore, § 6-11-21(a)'s cap does not apply.

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Further, under Alabama law, when determining whether the punitive damages
for the state law claims are excessive, the Court looks to the Gore guideposts, and the
guidelines set out in Hammond v. City of Gadsden and Green Oil v. Hornsby. Under
Alabama law, the Court looks to the following factors when determining if punitive
damages are excessive: (1) the “reasonable relationship to the harm that is likely to
occur from the defendant’s conduct as well as to the harm that actually occurred”;
(2) “the degree of reprehensibility of the defendant’s conduct . . . including the
duration of this conduct, the degree of the defendant's awareness of any hazard
which his conduct has caused or is likely to cause, and any concealment or ‘coverup’ of that hazard, and the existence and frequency of similar past conduct” (3) if
the wrongful conduct was profitable to the defendant; (4) the financial position of
the defendant; (5) the cost of litigation; (6) if criminal sanctions have been imposed;
and (7) if there have been other civil actions against the same defendant based on
the same conduct.” Green Oil Co. v. Hornsby, 539 So. 2d 218, 224 (Ala. 1989). In
addition, Courts may also look to: the nature and the extent of any effort the
defendant made to remedy the wrong and the opportunity or lack of opportunity
plaintiff gave the defendant to remedy the wrong complained of (Ala. Code § 6-1123(b)); the desirability of discouraging others from similar conduct; and the impact
on innocent third parties. Am. Emps. Ins. Co. v. S. Seeding Servs., Inc., 931 F.2d 1453,

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1457 (11th Cir. 1991) Here, each claim results from Defendants' actions of going onto
Plaintiffs' property and turning off utility services, with minimal difference between
each specific incident. As such, all of Plaintiffs’ claims are analyzed together.
1. Harm from Defendants’ Conduct
Weighing against Defendants is the relationship between the harm that
occurred from Defendants' conduct and the punitive damages. Here, Defendants'
conduct aimed to force Plaintiffs into having no choice but to comply with the
excessive charges of Defendants or else be denied necessary utilities. Defendants
also threatened criminal prosecution or foreclosure if Plaintiffs did not comply with
Defendants' charges. Plaintiffs had no real choice given those two options. The harm
to Plaintiffs resulting from either criminal prosecution or foreclosure greatly exceeds
the amount of punitive damages Defendants would currently pay.
Further, Defendants also offer a similar argument regarding the proportionality
of the punitive damages to the amount in compensatory or nominal damages in the
1983 claims to show the awarded punitive damages are excessive. As discussed with
the 1983 claims, when nominal damages are awarded, the proper ratio is between the
harm caused to the plaintiffs and the punitive damages. Here, the ratio of the
punitive damages is not excessive, as it aligns in a fair ratio with the actual harm
suffered. Regarding the claim of outrage, in which Plaintiffs received compensatory

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damages, the highest ratio is 10:1. While 10:1 is on the higher end, this court has
upheld such a ratio in prior cases. Brim v. Midland Credit Management, Inc., 795 F.
Supp. 2d 1255, 1264 (N.D. Ala. 2011). As such, the relationship between the amount
of harm and the amount in punitive damages weighs against remittitur.
2. Reprehensibility
For the same reasons discussed when determining whether the punitive
damages violated federal law, the Court finds Defendants’ actions tremendously
reprehensible and worthy of the amount of punitive damages awarded.
3. Profitability
Because Defendants stood to profit based on their conduct also weighs against
remittitur. Here, it is near impossible to imagine another reason why Defendants
took the actions against the plaintiffs other than profit. Defendants sought to get
some sort of compensation, either in the form of payments from Plaintiffs or, as
threatened, by obtaining compensation through foreclosure or criminal proceedings.
Once Defendants went onto Plaintiffs' property to turn off the utilities, Plaintiffs had
no real choice other than to pay Defendants. Since there is no evidence that
Defendants simply wanted to deprive Plaintiffs of utilities solely out of malice or
hatred, profit is the only logical reason for their conduct.
4. Financial Position of Defendants

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The strongest factor in favor of Defendants is the impact of the punitive
damages on their financial position. Defendants point to the Alabama Supreme
Court's language in Green Oil, which states that punitive damages should sting, not
destroy. Green Oil v. Hornsby, 539 So.2d 218, 222 (Ala. 1989). Regardless of the
calculation of the net worth of Defendants' businesses, the total punitive damages
are currently $4,393,000. Such an award may, in fact, significantly hinder
Defendants' ability to continue operating in their current state. Nevertheless, this
factor alone does not make the punitive damages worthy of remittitur.
5. Costs of Litigation
Regarding the 1983 claims, the Davis Plaintiffs have requested attorney fees of
$191,300.83. (Doc. 182.) And the Lawrence Plaintiffs have requested $168,210.83.
The Court does not find that this factor weighs in favor of Defendants. Defendants
argue that the amount of fees is evidence of Plaintiffs attempting to profit from the
litigation. The Court disagrees.
6. Criminal Sanctions
No criminal sanctions have been brought against Defendants. For the reasons
stated when analyzing the Gore factors, the unique circumstances of this case make
this factor less relevant.
7. Other Civil Actions

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No other civil actions have been brought against Defendants. For the reasons
stated when analyzing the Gore factors, the unique circumstances of this case make
this factor less relevant.
8. Defendants’ Attempt to Remedy Wrong
To show that Defendants’ attempted to remedy the wrong, Defendants argue
that they removed the liens placed on Plaintiffs’ homes voluntarily “shortly before
the trial commenced,” did not press any criminal charges against Plaintiffs who they
contend tampered with the water shut-off mechanisms, and that “each set of
Plaintiffs has received essentially free sewer services for approximately four years.”
This is not enough to show that Defendants’ attempted to remedy the wrong.
Defendants would not take any partial payments when Plaintiffs attempted to pay
them. During the trial, evidence demonstrated that Plaintiffs attempted to make
partial payments by submitting checks each month to Defendants for what would
have been the standard sewer charges. Defendants through counsel, rejected those
payments each month by returning them. Each time, Defendants, through counsel,
informed Plaintiffs that the entire balance, including all Defendants contended was
owed, had to be repaid. Each time, Defendants’ previous counsel added interest as
well the attorney’s fees that Defendants had incurred up to that point defending the
litigation to their already outrageously excessive balance. Such amount was then

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included as a lien on each of the plaintiffs’ homes. This made Plaintiffs unable to sell
their homes. Plaintiffs, who could not sell their homes because of the liens, became
prisoners in their own homes without any recourse other than their suits. Plaintiffs’
monthly sewer bills were only $92 per month. Plaintiffs’ standard sewer charges over
the four years, had Defendants not assessed outrageous fees, would have been
approximately $4,416. Instead, as of May 3, 2021, Defendants claimed that over the
four years: (1) the Davises owed $133,085.68; (2) the Lawrences owed $165,502.94;
and (3) the Slones owed $179,614.00. Defendants did not attempt to remedy the
wrong and this factor favors upholding the awarded punitive damages.
9. Impact on Innocent Third Parties
The impact the punitive damages may have on innocent third parties may favor
Defendants. Defendants provide necessary utilities to a community. If this court
sustains the award, Defendants may choose to raise rates and spread the loss to
average citizens. However, the punitive damages given, as discussed below, will
discourage Defendants from doing such conduct to other persons in the community.
Allowing Defendants to continue their conduct by reducing the jury’s award, thus
making their conduct financially beneficial to Defendants, cuts against the purpose
of such damages. As a result, this factor does not mandate remittitur.
10. Desire to Discourage Conduct

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Finally, the desire to prevent others from engaging in similar conduct as
Defendants weighs heavily against remittitur. Defendants state that this factor does
not weigh against remittitur since utility companies will simply not change their
current practices. (Doc 199.) However, the current verdict would clearly deter
similarly situated private sewer companies from doing this in the future. (Id.) As it
stands, the punitive damages, in this case, would deter companies from doing similar
actions. Further, the speculation by Defendants that even if companies who engage
in similar conduct get notice of the risk of punitive damages, the ruling will not
dissuade companies is illogical. Therefore, the desirability to discourage others
weighs against remittitur.
C. Defendants Are Not Small Businesses Under § 6-11-21(c)
“[I]n all civil actions where entitlement to punitive damages shall have been
established under applicable law against a defendant who is a small business, no
award of punitive damages shall exceed fifty thousand dollars ($50,000) or 10
percent of the business' net worth, whichever is greater.” Ala. Code § 6-11-21(b). A
“small business” means a “business having a net worth of two million dollars
($2,000,000) or less at the time of the occurrence made the basis of the suit.” Ala.
Code § 6-11-21(c).

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Defendants state that under Ala. Code § 6-11-21(c), Defendants are a small
business and are entitled to a cap on punitive damages. The dispute between
Plaintiffs and Defendants regarding whether the statute should apply lies within the
competing definitions of “net worth”. Plaintiffs contend that net worth should be
calculated by general accounting principles, a calculation given by Plaintiffs' expert,
Don Woods. (Doc. 231 Ex. C). Woods's calculation shows that all Defendants'
businesses exceed $2,000,000 in net worth. In contrast, Defendants contend that
net worth should be calculated according to the definition given in Ala. 1975 § 4014A-23(b), the Alabama Business Privilege and Corporation Shares Tax Act of 1999.
Defendants provide a calculation through their expert, Ben Schillaci, that shows all
Defendants' businesses are below $2,000,000. Therefore, to determine whether the
cap on punitive damages applies, the Court must determine the appropriate
definition of “net worth” within Ala. Code § 6-11-21(b).
1. The Definition of Net Worth in § 6-11-21(c)
"The fundamental rule of statutory construction is that this Court is to ascertain
and effectuate the legislative intent as expressed in the statute. League of Women
Voters v. Renfro, 292 Ala. 128, 290 So.2d 167 (1974). In this ascertainment, we must
look to the entire Act instead of isolated phrases or clauses; Opinion of the Justices, 264
Ala. 176, 85 So.2d 391 (1956)." Darks Dairy, Inc. v. Alabama Dairy Comm'n, 367

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So.2d 1378, 1380 (Ala.1979). Further, when discerning legislative intent, a Court
must look to the language of the statute. Ex parte Waddail, 827 So.2d 789, 794 (Ala.
2001). If the language, giving it its plain and ordinary meaning, is unambiguous, there
is no further need for the court to provide construction. Id.
Within § 6-11-21(c), there is no mathematical calculation to determine what net
worth should mean. “Net worth” stands alone, inviting conflicting definitions from
the parties and their respective experts. Defendants ask this Court to accept the
definition of net worth in Ala. § 40-14A-23(b). There, the definition comes within
the larger statutory text of the Alabama Business Privilege and Corporation Shares
Tax Act of 1999. When determining privilege tax, net worth is “an amount equal to
the sum, but not less than zero, of the capital accounts of the owners of the limited
liability entity determined as of the first day of the taxable year of the entity” and
includes “compensation, distributions or similar amounts paid or accrued to each
direct or indirect partner or member to the extent the amounts exceed $500,000 with
respect to each partner or member in the determination period.” Ala. Code § 4014A-23. Plaintiffs ask the Court to adopt the definition of net worth according to
generally accepted accounting principles like Ala. Code § 8-7A-10. Generally
accepted account principals instruct the Court to find the difference between
Defendants’ fair market value of assets and liquidation value of liabilities.

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If the Court were to follow Defendants’ proposed calculation, the Court would
reach a faulty result. Defendants’ expert, Schillaci, contends that Builder1.com, LLC
and SERMA Holdings, LLC would have a net worth of $694,000. Further, Schillaci
contends that Eco-Preservation Services, LLC would have a maximum net worth of
$793,000. Allowing Defendants to escape from paying punitive damages when their
conduct was reprehensible only because the Court applies a definition of net worth
found in the tax code is an absurd result and against the intent of the Alabama
legislature.
Further, Defendants incorrectly state that § 40-14A-23(b) is the only other
place in the Alabama Code where net worth is defined. For example, the term “net
worth” is used in §§ 8-7A-10; 11-51-154; 40-2A-7; and 11-51-191. Each of those uses
provides a definition more like Plaintiffs’ definition than the definition proposed by
Defendants found in § 40-14A-23(b), in that each require net worth to be calculated
by generally accepted accounting principles, basing net worth on fair market value,
or as shown by an entities latest financial statement.
Given that § 6-11-21(c) regards a punitive damage cap, not issues of privilege
taxes, the definition of net worth should be the most commonly accepted definition.
Without direction by the Alabama legislature, a definition of net worth when
calculating how much a company owes in privilege taxes is not the most commonly

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accepted definition. The legislature, when enacting § 6-11-21(c), could have
incorporated the definition in § 40-14A-23(b). However, the legislature did not.
Given the silence on the definition, §§ 8-7A-10; 11-51-154; 40-2A-7; and 11-51-191
offer other guidance contradicting § 40-14A-23(b). All the above Code sections state
that net worth is calculated based on fair market value or in accordance with
generally accepted accounting principles.
Further, the Northern District in Wilson v. Gillis Advertising Co., 145 F.R.D.
578, 582 (N.D. Ala. 1993) suggests that, within the same code section, net worth
should be defined under general accounting principles. The combination of the
Code's alternate definitions of net worth, the Northern District's approval of a
similar definition within the structure of Ala. Code § 6-11-23 and the illogical nature
of extending a one-off definition within the Privilege and Corporation Shares Tax
Act to apply to a punitive damages cap all lend themselves to applying generally
accepted accounting principles.
Even Defendants’ expert admits that he did not calculate the net worth of
Defendants. (Doc. 227-2 at 43.) Plaintiffs’ counsel asked Defendants’ expert, “In
this case, what did you do to determine net worth?” (Id.) Defendants’ expert
responds, “Well, I didn’t determine net worth . . . . I came up with an estimated
valuation.” (Id.) The relevant statutes in Alabama do not look to the valuation of the

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company. The statute looks to net worth. Therefore, the Court will base its opinion
on whether Defendants are small businesses using Plaintiffs’ expert who followed
generally accepted accounting principles when determining Defendants’ net worth.
Thus, if by Plaintiff’s expert’s calculations Defendants' net worth is lower than
$2,000,000, then the cap on punitive damages in § 6-11-21(c) will apply.
2. Defendants Are Not Small Businesses
Defendants filed a Motion to Strike stating that, even if the Court decides that
Plaintiffs’ definition of net worth is correct, the Court should not rely on Woods’s
calculations because they are based on the impermissible hearsay of Boozer Downs,
attorney for the Town of Woodstock. This motion is due to be denied. Woods uses,
against Defendants' assertions, multiple documents and figures to find Defendants'
net worth.
When calculating his opinion, Woods’ relied in part on the affidavit of Downs
that states he had a conversation with Defendant Mike White where White verbally
offered to sell the entire sewer system to the town of Woodstock Alabama for either
$10 or $11 million. It also states that in 2009, White offered to sell the town just the
sewer collection system for $3 Million. Woods incorporated Downs’s statements
when determining the value of the sewer system, a key component of the valuation
of Defendants' businesses. While Down’s affidavit may not be admissible, there is

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no rule of evidence nor case law to prevent Woods from incorporating the affidavit
into his analysis of the net worth of Defendants' businesses. It is reasonable for an
accountant to rely on the value Defendant White would be willing to sewer collection
system when determining fair market value of the asset. Plaintiff does not aim to
introduce Downs' affidavit into evidence, nor does Woods solely use Downs's
affidavit to calculate net worth. Along with tax returns and other exhibits, Woods
uses the affidavit to obtain a reasonable figure for the sewer system Defendants own.
Therefore, as Woods's calculation follows the appropriate calculation of net worth,
and the evidence used to calculate the net worth against Defendants' assertions is
appropriate, his calculation is the correct formulation.
a) Defendant SERMA Holdings, LLC & Builder1.com, LLC
Builder1.com, LLC is part of SERMA. Thus, both parties analyzed SERMA
Holdings, LLC only. The report of Woods states the appropriately calculated net
worth of SERMA Holdings. In 2017, at the time of the occurrence, the net worth of
SERMA Holdings LLC was above $2,000,000. (Doc. 231 Ex. C). Further, since
2017, SERMA's net worth has never been below $2,000,000. (Id.) Therefore,
SERMA Holdings is not a small business under § 6-11-21(c).
b) Defendant Eco-Preservation Services LLC

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The report of Woods states the appropriate and accurate net worth of EcoPreservation Services. At the time of the occurrence, the net worth of EcoPreservation Services LLC was above $2,000,000. (Doc. 231 Ex. C). Further, since
2017, Eco-Preservation Services' net worth has never been below $2,000,000. (Id.)
Therefore, Eco-Preservation Services is not a small business under § 6-11-21(c).
Since none of Defendants' businesses are below $2,000,000 in net worth, the
businesses are not subject to the cap on punitive damages in § 6-11-21(c). Further,
Defendants' arguments regarding the definition of "occurrence" are irrelevant since
Defendants would need to be subject to the cap on punitive damages to dispute such
an issue.
III. CONCLUSION
Given that neither the Gore factors nor Hammond/Green Oil factors weigh in
favor of remittitur, the Court sustains the award of punitive damages against
Defendants. Further, as to Defendants SERMA, Builder1, and Eco-Preservation
LLC, the small business cap § 6-11-21(c) does not bar the current amount in punitive
damages. Defendants' net worth exceeds $2,000,000 under the appropriate
calculation, and Defendants are not small businesses.
Defendants' Motion for Remittitur and Motion to Strike is DENIED. The case
is ORDERED to remain closed.

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DONE and ORDERED on August 3, 2022.

_____________________________
L. Scott Coogler
United States District Judge
206888

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