SECOND DIVISION MILLER, P. J., RICKMAN and REESE, JJ.
NOTICE: Motions for reconsideration must be physically received in our clerk’s office within ten days of the date of decision to be deemed timely filed. http://www.gaappeals.us/rules
June 21, 2019
In the Court of Appeals of Georgia A19A0005. MILLER v. LYNCH et al.
MILLER, Presiding Judge.
This is the second appearance of this case before the Court, the previous
appearance being reported in Miller v. FiberLight, LLC, 343 Ga. App. 593 (808 SE2d
75) (2017) (“Miller I”). Michael Miller appeals from the trial court’s grant of the
defendants’ motion for directed verdict, arguing that the trial court’s decision
purported to re-adjudicate the same issue we decided in Miller I and that the evidence
would have allowed a jury conclusion that the defendants breached their fiduciary
duties to him by rejecting offers to purchase FiberLight, LLC (“FiberLight”). Miller
also appeals from the trial court’s grant of the defendants’ motions in limine and the
trial court’s decision regarding sanctions against the defendants. For the reasons
elucidated below, we affirm in part and reverse in part. “A trial court may direct a verdict only if there is no conflict in the evidence
as to any material issue and the evidence introduced, with all reasonable deductions
therefrom, shall demand a particular verdict.” (Citation omitted.) King v. Ga. Dept.
of Corrections, 347 Ga. App. 606 (820 SE2d 445) (2018). “Where any evidence —
even slight evidence — supports the opposing party’s case, a directed verdict is
improper. We review the grant of a motion for directed verdict de novo, construing
the evidence in favor of the nonmovant.” (Citation omitted.) Id.
So viewed, the evidence at trial showed that FiberLight is a Delaware limited
liabilty company that provides fiberoptic services for various technology companies.
Miller was the chief executive officer of FiberLight and owned a minority interest in
the company. Defendants Thermo Development, Inc., FL Investment Holdings, LLC,
NT Assets, LLC and Thermo Partners, LLC (collectively, “Thermo”), are the majority
members of FiberLight, and James F. Lynch, is the executive chairman of
FiberLight’s board of directors.1 As the Thermo designee, Lynch also has the majority
of votes on FiberLight’s board.
FiberLight’s operations were governed by a limited liability company
agreement, which was periodically amended. The fourth amended operating
1 Throughout the record, Lynch is also referred to as Jim Lynch.
2 agreement, effective October 27, 2008, contained a schedule projecting how the
proceeds of a sale would be distributed if the company were to be sold in 2007, 2008,
2009, 2010, or 2011. The fifth amended operating agreement, effective March 17,
2011, set out a different schedule for the allocation of proceeds from a potential sale.
Miller testified, “when the operating agreements were put in place, they always had
a . . . it looked like about a five-year plan for selling the company. And that’s what
the schedules proved out to show as well.” Miller added that this was consistent with
discussions with Lynch “coming up on 2011.”
In April 2011, Lynch reported numerous bids for the purchase of FiberLight
to other individuals associated with the company. One bid was from a private equity
firm, General Atlantic, at a price of $325 million. A second bid was from another
private equity company, Summit, at a price of $320 million. Lynch’s email also
mentioned a plan to invite another one of the bidders to “meet management” and that
management presentations could begin the following week. A letter of intent from
General Atlantic, dated June 16, 2011, detailed a “non-binding proposal to acquire”
FiberLight. General Atlantic explained the assumptions on which its valuation was
based, its financing arrangements, and the projected timing for the acquisition.
General Atlantic also indicated it had received investment committee approval,
3 subject to due diligence and “customary closing conditions.” Miller testified that
General Atlantic pursued due diligence, a process in which he was involved. Miller
explained this due diligence process and testified, “after we got through all that, it
went back into [Lynch’s] court to negotiate the deal.” Miller, however, testified that
Lynch thereafter stated that General Atlantic had “retraded” (meaning the company
wanted to change the price), and therefore “[Lynch] wasn’t doing the deal.” Lynch
did not inform Miller of General Atlantic’s new bid amount.
According to Lynch, General Atlantic had submitted an acceptable and “very
strong offer,” and there was a meeting scheduled with General Atlantic
representatives. Lynch testified, “[w]e were going to go to New York, close ourselves
in a room, get the asset purchase agreement done because we agreed on price, come
up with a final document. But that was it. It didn’t happen.” On August 2, 2011,
Lynch sent an email to various persons working with FiberLight, including an analyst
and Thermo’s lawyer, stating, “GA retraded as I expected they would and we are
done.”
As to Summit’s bid, Miller testified that around the end of 2011, he met with
Summit, who wanted to “re-engage with FiberLight to buy the company.” Summit
submitted a letter of intent, dated March 10, 2012, in which it presented an
4 investment summary and identified its source of funds for the acquisition and
anticipated closing conditions. Miller testified that Summit engaged in a “very
detailed” due diligence process. Miller testified, however, that Lynch “said the same
thing he did on [General Atlantic]. He said they retraded the deal, and we’re not going
forward with it.”
At the close of all the evidence, the defendants moved for a directed verdict.
They argued that when this case first came before this Court on appeal, we reversed
the grant of summary judgment to the defendants because there were fact issues
regarding whether the defendants had rejected offers to purchase FiberLight, and the
evidence at trial showed that there were no binding offers that were capable of being
accepted. Miller responded that his position was not that the letters of intent were
final binding offers but that the defendants had shut down negotiations. Miller’s
counsel later contended that the defendants, acting through Lynch, “shut down
negotiations, cut off negotiations, didn’t do a deal that could have been done, and
that’s the breach of fiduciary duty.” The trial court granted the motion for directed
verdict, determining that although there were letters of intent, because there was no
“binding offer,” there was nothing to accept, and, resultantly, there was no breach.
5 The defendants also argued that (1) the decision not to sell FiberLight was
protected under the business judgment rule; (2) an exculpatory provision in the fifth
amended operating agreement barred Miller’s claims; and (3) and Miller had not
presented any evidence of his damages. The trial court did not rule on any of these
arguments.
Miller appeals from (1) the trial court’s grant of the directed verdict; (2) the
trial court’s ruling on its motion for sanctions against the defendants; (3) the trial
court’s grant of motions in limine filed by the defendants; and (4) the trial court’s
determination that he had no valid claim for prejudgment interest. We address each
argument in turn.
1. First, Miller argues that the grant of the directed verdict was clear legal error
because the trial court violated this Court’s binding holding in Miller I. Miller adds
that even without an analysis of whether the trial court failed to abide by the holding
in Miller I, the grant of the directed verdict should still be reversed. We agree that the
grant of directed verdict was improper.
“The requirements which must be met in a directed verdict situation are very
strict.” Hall v. Rome Auto. Co., 181 Ga. App. 621, 623 (3) (353 SE2d 542) (1987).
6 A motion for directed verdict should not be granted where there exists even slight material issues of fact, because the trial court is substituting its judgment for the jury’s; only when there is an absence of evidence or when no evidence supports an essential element of the case should a directed verdict be granted, because the trial judge takes the determination of the facts from the jury. The appellate review of directed verdicts is based upon the “any evidence” rule to support the case of the nonmoving party; when there is “any evidence,” a directed verdict must be reversed. The direction of a verdict is proper only where there is no conflict in the evidence as to any material issue, and the evidence introduced, with all reasonable deductions therefrom, shall demand a particular verdict. When there is opinion evidence, circumstantial evidence, presumptions of fact, or evidence subject to more than one reasonable construction, the appellate courts shall carefully scrutinize the grant of a directed verdict, because such evidence may be construed as providing the “any evidence” creating a jury question.
(Citation omitted.) Canton Plaza, Inc. v. Regions Bank, Inc., 315 Ga. App. 303, 303-
304 (732 SE2d 449) (2012). See also OCGA § 9-11-50 (a).
When this case last came before the Court, we determined that the grant of
summary judgment to the defendants was improper because “whether the defendants
rejected offers to purchase FiberLight, thereby breaching default fiduciary duties,
depend[ed] on disputed issues of material fact.” Miller, supra, 343 Ga. App. at 606
(2) (e). In ruling on the defendants’ motion for directed verdict, the trial court ruled
7 that the that the letters of intent were not binding offers which FiberLight could have
accepted.
Importantly, Miller not only argued that the defendants rejected offers to
purchase FiberLight; he repeatedly contended that they breached fiduciary duties to
him by shutting down or cutting off negotiations with the companies that had
demonstrated interest in purchasing FiberLight. Miller added that Lynch made such
decisions without consulting either the board of directors or FiberLight’s minority
owners. And, under Delaware law, one who manages an LLC can breach fiduciary
duties to minority members of the LLC by his “failure to negotiate with an interested
buyer in good faith — [this conduct] is governed by traditional fiduciary duties of
loyalty and care.” Auriga Capital Corp. v. Gatz Properties, 40 A3d 839, 858 (IV) (A)
(2) (Del. Ch. Jan. 27, 2012), judgment entered sub nom. Auriga Capital Corp. v. Gatz
Properties, LLC (Del. Ch. Feb. 23, 2012), affd., 59 A3d 1206 (Del. 2012).
We are cognizant that in his complaint Miller claimed that Lynch rejected at
least one offer, and he did not specifically allege a theory regarding terminated sale
negotiations. Nevertheless, “a plaintiff may sue on one theory and recover on another
so long as the complaint adequately states a claim for relief.” (Citation omitted.)
Walker v. Gowen Stores LLC, 322 Ga. App. 376 (745 SE2d 287) (2013). Although
8 the defendants argue that Miller “shifted” his theory of the case, they do not claim,
much less demonstrate, that this caused them prejudice. See Rogers v. Carmike
Cinemas, Inc., 211 Ga. App. 427, 430 (3) (439 SE2d 663) (1993) (“Although
[plaintiff] did not make a formal motion to amend her complaint to specify this legal
theory, she did assert this theory of recovery at trial. Defendant, who did not object
to the evidence as it unfolded so as to encompass this theory, has shown no prejudice
from the absence of express articulation in the complaint.”).
Here, Miller testified that the best time to sell the company was in 2011 or
2012, explaining that FiberLight had not been adding many fiberoptic networks at
that point and the company was “going to hit a huge economic wall in 2012, ‘13, and
‘14, and that’s exactly what happened.” According to Miller, Lynch did not seriously
consider the General Atlantic or Summit bids or negotiate in good faith, and
FiberLight was “turning everything down” and “shut[ting] down all discussions”
while companies around them were selling. Indeed, as explained above, Lynch
testified that General Atlantic’s bid was “very strong,” and that it was appropriate for
FiberLight’s “mix of business.” In fact, Miller explained that the bid from General
Atlantic was above the number that FiberLight had expected, and while he was never
told how much the bid was being reduced by, it could have withstood even a 10
9 percent reduction. Although Lynch testified that he was unable to “close the deal”
with General Atlantic because General Atlantic would not receive bank financing, an
email from Lynch reads, “GA retraded as I expected they would and we are done.”
As to Summit’s bid, Miller testified that a retrade was not a good reason to end
discussions. Also, Miller testified that Lynch never came to him or the other board
members to discuss the bids, and that he made his decisions singlehandedly. An
investment banker involved in the sales process testified, “[y]ou would always inform
the owners or the board as to the bids that came in and the price.”
There was evidence at trial, however slight, that Lynch was not negotiating
with interested buyers in good faith, supporting Miller’s claim for a breach of
fiduciary duties. Freyermuth v. Chon, 212 Ga. App. 845, 846 (443 SE2d 636) (1994)
(noting that in order to prevail on a motion for directed verdict, “there must be no
evidence of any kind supporting [the opposing party’s] position.”); Auriga Capital
Corp., supra, 40 A3d at 859, 875 (IV) (B) (determining that manager of the LLC
breached his fiduciary duties to the minority shareholders by “turning away a
responsible bidder which could have paid a price beneficial to the LLC and its
investors”). See also Gantler v. Stephens, 965 A2d 695 (Del. 2009) (reversing lower
court’s dismissal of lawsuit by minority shareholders against officers and directors
10 for violating their fiduciary duties, at the bidding stage, by “rejecting a valuable
opportunity to sell the company”). Because a directed verdict cannot be granted if
there is any evidence to support a contrary verdict, the trial court’s decision was error.
The defendants urge the Court to affirm the trial court’s grant of the motion for
directed verdict on the various other grounds that they argued before the trial court,
namely: (1) an exculpatory provision in FiberLight’s fifth amended operating
agreement precluded Miller from bringing his claims; (2) the defendants’ decision to
not sell FiberLight is protected by the business judgment rule; and (3) Miller cannot
prove his damages.
Although “in other circumstances application of [the right for any reason] rule
might be warranted, in the posture of this case it is not appropriate for us to do so.”
Robert, Ltd. v. Parker, 215 Ga. App. 310, 311 (2) (450 SE2d 219) (1994). “In effect,
the trial court’s grant of the directed verdict pretermitted the issues concerning [the
applicability of the exculpatory provision or the business judgment rule] and decided
the case based upon [Miller’s] failure to prove that [the defendants breached fiduciary
duties]. Thus, the trial court made no rulings on the [applicability of the exculpatory
provision or the business judgment rule] or on the question of . . . damages, . . . which
11 are issues to be decided by the trial court in the first instance.” Id. Thus, “we decline
to address these issues before the trial court has done so.” Id.
2. Next, Miller argues that the trial court committed reversible error by
ordering that the defendants pay $45,000 in attorney fees and expenses. In Miller’s
view, this was an “insignificant sanction” that did not sufficiently punish the
defendants for their discovery violation. This enumeration presents no grounds for
reversal.
“Trial courts have broad discretion to control discovery, including the
imposition of sanctions.” (Footnote omitted.) ASAP Healthcare Network, Inc. v. Sw.
Hosp. & Med. Ctr., Inc., 270 Ga. App. 76, 77 (1) (606 SE2d 98) (2004). “As a general
rule, a trial court should . . . reserv[e] the sanctions of dismissal and default for the
most flagrant cases — where the failure to comply is wilful, in bad faith or in
conscious disregard of an order.” (Citation omitted.) Motani v. Wallace Enterprises,
Inc., 251 Ga. App. 384, 385 (1) (554 SE2d 539) (2001); McConnell v. Wright, 281
Ga. 868, 869 (644 SE2d 111) (2007) (cautioning against the use of harsh sanctions
such as a default judgment except in “extreme cases”). Moreover, we will not
“interfere with a trial judge’s exercise of the broad discretionary powers authorized
12 under the discovery provisions of the Civil Practice Act in the absence of an abuse
of discretion.” (Citation omitted.) Motani, supra, 251 Ga. App. at 385 (1).
Miller filed a motion for sanctions against the defendants in January 2018.
Miller argued that less than three days before the consolidated pretrial order was due
the defendants produced letters of intent to acquire FiberLight following the sale
process, which the company embarked on in 2011, as well as e-mails demonstrating
significant market interest in acquiring FiberLight. Miller requested that the trial
court strike the defendants’ answer and enter a default judgment against them.
Former counsel for the defendants, who oversaw the collection of documents
from the various clients, averred that he had retrieved potentially responsive
documents from both the defendants and the law firm, but that there were some
documents that they had inadvertently neglected to produce from the firm’s internal
corporate counsel files. At the hearing on Miller’s motion, the defendants again
represented that the delay was inadvertent and argued that when the failure to produce
was discovered, the documents were promptly produced.
After argument, the trial judge indicated that she had read the parties’ briefs
and would award Miller attorney fees related to the motion. The trial court later
ordered the defendants to pay $45,000 in attorney fees, insofar as the late production
13 of the documents caused Miller to incur fees and expenses to address the issues raised
by the late production.
Under these circumstances, we determine that the trial court did not abuse its
broad discretion by not imposing a more severe sanction. See Anderson v. Silver, 300
Ga. App. 1, 5 (684 SE2d 73) (2009) (noting that although plaintiff was “dilatory and
evasive” the trial court abused its discretion in dismissing plaintiff’s complaint).
Thus, this enumeration of error lacks merit.
3. Next, Miller argues that the trial court abused its discretion in granting
various motions in limine to exclude evidence, filed by the defendants. According to
Miller, the trial court erred in disallowing evidence that Miller was terminated from
his employment “without cause” in February 2013 (and his interest in FiberLight was
reduced as a result), as well as evidence introducing changes to the FiberLight
operating agreement which progressively reduced the benefits that he would receive
from a sale. We agree in part.
“If . . . the trial court decides to rule on the admissibility of evidence prior to
trial, the court’s determination of the admissibility is similar to a preliminary ruling
on evidence at a pretrial conference and it controls the subsequent course of action
. . . .” (Citation and emphasis omitted.) Hand v. Pettitt, 258 Ga. App. 170, 172 (1) (a)
14 (573 SE2d 421) (2002). “We review a trial court’s ruling on a motion in limine for
abuse of discretion.” (Footnote omitted.) Shiver v. Ga. & Florida Railnet, Inc., 287
Ga. App. 828 (1) (652 SE2d 819) (2007). Simultaneously,
by its very nature, the grant of a motion in limine excluding evidence suggests that there is no circumstance under which the evidence under scrutiny is likely to be admissible at trial. In light of that absolute, the grant of a motion in limine excluding evidence is a judicial power which must be exercised with great care.
State of Ga. Dept. of Transp. v. Douglas Asphalt Co., 297 Ga. App. 470, 471 (677
SE2d 699) (2009).
As explained in Miller I, Miller was an at-will employee, and he is not seeking
wrongful termination damages. Miller I, supra, 343 Ga. App. at 604 (1) (d). And, the
defendants “did not make the reasons for [Miller’s] termination an issue in the case.”
Burritt v. Media Marketing Svcs., Inc., 242 Ga. App. 92, 93 (1) (527 SE2d 890)
(2000). Thus, although Miller complains of a pattern of misconduct and hostile
behavior on the defendants’ part, whether Miller was wrongfully terminated in 2013
was not relevant and “presented no issue for jury resolution.” Id. (where the issue at
trial was whether plaintiff received a seven-day notice of termination, the contract
was terminable at will, and the defendant did not make the reasons for plaintiff’s
15 termination an issue, “any improper motive for [plaintiff’s] discharge” was irrelevant
and presented no issue for jury resolution).
Regarding the operating agreements evidencing Miller’s progressively reduced
interest in FiberLight, however, we cannot say that such evidence would not be
relevant under any circumstances. Miller argues that the defendants were incentivized
to reject above-market offers to purchase FiberLight until they further reduced his
share of potential sale proceeds, along with the shares of other minority owners. As
we noted in Miller I, the fifth amended agreement “reduced the individual members’
interests and increased Thermo Telecom Partners’ and NT Assets’ interests.” Miller,
supra, 343 Ga. App. at 597 (1). The October 27, 2008 fourth amended operating
agreement shows that Miller’s incentive interest2 in FiberLight was .0010 percent. In
the fifth amended operating agreement, which became effective in March 2011, this
interest was reduced to .0008 percent. Additionally, charts in both operating
agreements appear to confirm that Miller would have received a significantly higher
percentage of potential sale proceeds under the 2008 fourth amended operating
2 The incentive interest was “intended to compensate the individual members, who were also employees of FiberLight, upon the sale of the business.” Miller I, supra, 343 Ga. App. at 595 (1).
16 agreement, as compared to when the operating agreement was subsequently modified
in 2011.
Insofar as Miller has alleged that the defendants were holding off on selling
FiberLight as they progressively reduced his interest in the company, and they would
directly benefit from these changes in the event of a later sale, the jury may infer from
the changes in the operating agreements that the defendants had a motive to reject
valid above-market bids. At the very least, the relevance of this evidence is
“doubtful” and thus the grant of the motion in limine was improper. See Hand, supra,
258 Ga. App. at 172-173 (1) (a) (“The Georgia rule favors the admission of any
relevant evidence, no matter how slight its probative value; evidence of doubtful
relevance or competency should be admitted and its weight left to the jury.”) (citation
omitted); Newman v. Roberts, 147 Ga. App. 157 (1) (248 SE2d 217) (1978) (trial
court properly admitted evidence where it may have been of assistance to the jury in
understanding the sequence of events surrounding the execution of a note and the
relationships which existed between the parties at the time the note was executed);
Colonial Pipeline Co. v. Westlake Club, Inc., 112 Ga. App. 412, 415 (4) (145 SE2d
669) (1965) (“This evidence was, at least, of doubtful relevancy to the issues in the
17 case, and the rule in this State where the admissibility of evidence is doubtful is to
admit it and leave its weight and credit for the jury’s consideration.”).
4. Lastly, Miller argues that the trial court erred in determining that he did not
have a claim for prejudgment interest.3 The trial court’s ruling was proper.
First, we reject Miller’s claim that he was entitled to prejudgment interest
pursuant to OCGA § 13-6-13. “OCGA § 13-6-13 provides for prejudgment interest
in breach of contract cases, as follows: In all cases where an amount ascertained
would be the damages at the time of the breach, it may be increased by the addition
of legal interest from that time until the recovery.” (Emphasis supplied.) Braner v.
Southern Trust Ins. Co., 255 Ga. 117, 119 (1) (335 SE2d 547) (1985); H & H Subs,
Inc. v. Lim, 223 Ga. App. 656, 659 (3) (478 SE2d 632) (1996) (“Section 13-6-13
applies to contract actions.”).
We have recognized that prejudgment interest under this statute may be
available in a “tort action” involving a breach of a duty where the duty “aris[es] from
a contractual right.” Tower Financial Svcs., Inc. v. Smith, 204 Ga. App. 910, 916 (2),
3 Regardless of whether the defendants used a proper procedure in an attempt to preclude Miller from presenting evidence regarding prejudgment interest, we will address the trial court’s decision that the claim lacked merit. Exxon Corp. v. Dept. of Transp., 202 Ga. App. 43, 43-44 (1) (413 SE2d 238) (1991).
18 918 (4) (423 SE2d 257) (1992). As we stated in Miller I, however, “Miller does not
base his claims upon any fiduciary duty imposed in the limited liability company
agreements. Instead, he bases his claims upon fiduciary duties imposed by default
under Delaware law.” Miller I, supra, 343 Ga. App. at 598 (2) (a), (b). These include
duties of loyalty and care, which we determined had not been eliminated by the
operating agreements. Id. at 599-601 (2) (a). Thus, the default fiduciary duties at issue
did not arise from any contractual right, and prejudgment interest would not have
been available under OCGA § 13-6-13. See H & H Subs, Inc., supra, 223 Ga. App.
656 at 659 (3) (prejudgment interest under OCGA § 13-6-13 was not available
because the lawsuit “sound[ed] in tort”); Stratton Indus., Inc. v. Northwest Ga. Bank,
191 Ga. App. 683, 687 (2) (a) (382 SE2d 721) (1989) (upholding award of
prejudgment interest under OCGA § 13-6-13 because the verdict was based on a
“contract theory”).
Also, contrary to Miller’s assertion, his potential damages in this case are not
liquidated so as to provide for prejudgment interest under OCGA § 7-4-15. Under this
statute,
[a]ll liquidated demands, where by agreement or otherwise the sum to be paid is fixed or certain, bear interest from the time the party shall
19 become liable and bound to pay them; if payable on demand, they shall bear interest from the time of the demand. In case of promissory notes payable on demand, the law presumes a demand instantly and gives interest from date.
“The word ‘liquidated’ as used in OCGA § 7-4-15 means ‘settled,
acknowledged, or agreed.’” Holloway v. State Farm Fire & Cas. Co., 245 Ga. App.
319, 321 (1) (b) (537 SE2d 121) (2000). Thus, “[d]amages are liquidated when they
are an amount certain and fixed, either by the act and agreement of the parties, or by
operation of law; a sum which cannot be changed by the proof; it is so much or
nothing.” (Citation omitted.) Carter v. Ravenwood Dev. Co., 249 Ga. App. 603, 605
(2) (549 SE2d 402) (2001).
This is not a case in which Miller, if successful at trial, stands to receive either
a specific verdict amount or nothing at all, because there are different potential sales
involved. And the jury, based on the proof, will determine the time(s) at which the
defendants breached fiduciary duties to Miller, if any. See Holloway, supra, 245 Ga.
App. at 321 (1) (b) (“A claim is unliquidated when there is a bona fide contention as
to the amount owing.”). Thus, the trial court properly concluded that Miller did not
have a valid claim for prejudgment interest under OCGA § 7-4-15.
20 Given the foregoing, we reverse the grant of the directed verdict and the
exclusion of evidence regarding Miller’s reduced ownership interest as evidenced by
the operating agreements, but otherwise affirm the trial court’s rulings at issue.
Judgment affirmed in part and reversed in part. Rickman and Reese, JJ.,
concur.