A Summary of Nineteenth Street Investments, Inc. et al v. Robertson et al.

On November 4, 2015, The Cumberland School of Law will host Oral Arguments in cases before both the Alabama Supreme Court and the Alabama Court of Criminal Appeals. The case before the State’s Supreme Court implicates three issues of first impression (i.e., legal questions that have not arisen in the state’s reported case law), as well as other issues in which the Appellants argue the trial court erred in entering a judgment and attendant $15,150,000 jury award in favor of the Appellees. In the criminal proceeding before the Alabama Court of Criminal Appeals, Death Row inmate John Russell Calhoun appeals a capital murder verdict entered against him on the grounds that he is entitled to an evidentiary hearing on the issue of his intellectual disability.

The occasion piqued our interest here at the Cumberland Law Review, and we’ve accordingly prepared a summary of each case’s background, along with a primer on the issues to be argued. We encourage our student-colleagues, faculty, and friends to take advantage of the opportunity to observe these arguments, and we hope they will find the material that follows to be a helpful introduction.


Nineteenth Street Investments, Inc. et al v. Robertson et al.

In the Supreme Court of Alabama

Oral Argument November 4, 2015

Cumberland School of Law

Kyle Weaver

&

Kayla A. Currie

Summary of the Facts and Issues

On a summer night in 2007, nineteen-year-old Brittany Caffee, carrying three other teenage passengers, drove her car off of a public highway in Tuscaloosa County and crashed into a tree. The impact killed one passenger, thirteen-year-old Drew Robinson, and seriously injured the remaining two. Ms. Caffee was intoxicated at the time of the accident, having previously bought liquor from the “14th Street BP” station in Bessemer, then owned by Nineteenth Street Investments, Inc. (“Nineteenth”). The store reportedly “had been known” to sell alcohol to underage minors.

Four lawsuits on behalf of those involved in the crash were filed and consolidated for trial in Jefferson County Circuit Court in February 2013. In the initial phase of the proceedings, a jury heard evidence on claims that the Plaintiffs brought under the Alabama Dram Shop Act (imposing liability on merchants who sell alcohol to minors or obviously intoxicated persons) and the Alabama Civil Damages Act. Second, in a non-jury trial, the parties argued over whether the Plaintiffs were permitted to “pierce the corporate veil” (where courts put aside limited liability and hold a corporation’s shareholders or directors personally liable for the corporation’s actions or debts) and reach Ibrahim S. Sabbah, the sole shareholder, officer, and director of Sabbah Brothers Enterprises (“SBE”), which owned Nineteenth.

During jury selection, Plaintiffs’ counsel exercised ten of its thirteen preemptory strikes to remove ten white jurors from the twenty-two prospective venire pool of jurors. The resulting jury panel consisted of eight African-Americans and four whites. Satisfied with the Plaintiffs’ articulation of race-neutral reasons for the preemptory strikes and resulting composition of the jury panel, the trial court denied the Defendants’ Batson challenge[1], and the case proceeded to trial with the challenged jury.

The jury in the initial phase of the trial found for the Plaintiffs and returned a verdict of $1.65 million in compensatory damages and $13.5 million in punitive damages against Nineteenth. The trial court proceeded to the second phase of trial, wherein Nineteenth’s corporate veil was pierced, holding SBE liable for the judgment against Nineteenth. The court also pierced the corporate veil of SBE and held Sabbah personally liable for the entire judgment. The damages were apportioned as follows:

  • Michael Waldrop, passenger: $750,000 in compensatory damages and $3 million in punitive damages.
  • Sharon Robertson, mother of the deceased Drew Robertson: $7 million.
  • Jennifer Vickery, passenger: $3.9 million in compensatory and punitive damages.
  • Tammy Hardin, mother of Brittany Caffee: $500,000 in punitive damages.

On appeal, the Defendants raise three issues: First, that they were denied the right to a fair trial when the trial court improperly denied the Batson challenge. Second, the Defendants argue they are entitled to a new trial or remittitur because the punitive damages award was based on bias, passion, and prejudice. Finally, the Defendants assert that Nineteenth’s corporate structure was erroneously disregarded, and that the corporate veil was erroneously pierced.

After the parties briefed the Appeal, the Alabama Supreme Court issued an order asking they brief and argue three additional issues relating to the punitive damages award and apportionment:

  • Alabama law is clear that any fault on the part of the plaintiff does not prohibit recovery of compensatory damages in a dram shop action such as this one. However, may the fault of the plaintiff be considered in determining whether and in what amount punitive damages may be appropriate?
  • In a punitive damages case with multiple plaintiffs, should punitive damages be assessed for each individual plaintiff or should there be one punitive damages award that is then divided between the plaintiffs?
  • In deciding whether the punitive damages award is excessive, which should the Court consider: (a) the total punitive damages awarded or (b) the amount of punitive damages awarded to the individual plaintiffs?

These three questions are matters of first impression in the State of Alabama, and should have significant implications for punitive damages jurisprudence. But because the parties only recently submitted briefs on these issues, our Editors have not summarized the parties’ respective positions on them, and will look forward to seeing these questions resolved in real-time! What follows are summaries of the arguments initially raised on appeal.

The Batson Challenge

In Batson v. Kentucky, the United States Supreme Court held that “purposeful racial discrimination in selection of the venire violates a [criminal] defendant’s right to equal protection because it denies him the protection that a trial by jury is intended to serve.”[2] This doctrine has since been extended apply to both civil and criminal cases.[3] Removing a juror for racial reasons is a violation of both the excluded juror’s and challenging party’s equal protection rights.

In Alabama, there is a three-step process for evaluating claims of discrimination. First, the defendant must make a prima facie showing that members of the venire were struck on the basis of race.[4] If the defendant does so, the burden shifts to the plaintiff to articulate a race-neutral reason for striking the juror.[5] The proffered reason must “articulate a clear, specific, and legitimate reason for the challenge which relates to the particular case to be tried, and which is non–discriminatory.”[6] Finally, the trial court determines whether the defendant has met his burden of proving purposeful discrimination. An appellate court reviews the trial court’s determination in a Batson challenge under the clearly erroneous standard of review.

On appeal, Appellants assert that the Appellees’ proffered reasons for striking white members of the jury were mere pretext for discrimination, based on “group bias, and on disparate treatment of persons, as black jury venire members shared characteristics and traits of the struck white members.”[7] Specifically, the Appellants argued that striking members of the venire from Hoover, Alabama, an affluent white suburb, would “guarantee a disproportionate share of Caucasian venire members.” Additionally, by comparing the characteristics such as church membership, place of employment, and job title of white venire members who were struck with those of the African-American members of the venire who were not struck, Appellants emphasized that the reasons proffered for the preemptory strike of white venire members were not equally applied to African-American members of the venire.

The Appellees contend that their strikes were based on race-neutral criteria and concerns such as employment-related reasons; concerns regarding alcohol-related issues; past or present affiliations with religious congregations believed to be hostile to lawsuits or drinking; courtroom appearance; demeanor and dress; and community affiliation. Appellees sought to demonstrate, on a juror-by-juror comparison, that where there were shared traits among struck and non-struck jurors, there were other non-discriminatory traits that led to the jurors’ dismissal. Appellees highlighted that if at least one non–discriminatory reason was given for preemptively striking a juror, no other inquiry need be made. Appellees further argue that the trial court acted within its discretion and is due a deferential appellate review.

Punitive Damages

Alabama courts consider the following factors when determining if a punitive damages award is unconstitutional: (a) the relationship of the punitive damages to the harm that has actually occurred and is likely to occur because of the defendant’s conduct; (b) the reprehensibility of the defendant’s conduct; (c) the profit gained by the defendant’s misconduct; (d) the defendant’s financial position; the plaintiff’s cost of litigation; (e) whether criminal sanctions were imposed for the same conduct; and (f) whether there are other civil actions against the defendant based on the same conduct.[8] A trial court’s determinations as to the excessiveness of punitive damages are subject to de novo review.

Appellants argue that the punitive damages award entered against them is excessive when evaluated by the factors listed above. Appellants concede that selling alcohol to a minor is a serious, but argue that their conduct was not reprehensible, as it did not involve maliciousness or deceit. Appellants further question whether their conduct was reprehensible when Caffee knowingly and unlawfully purchased the alcohol, and admitted to knowingly driving drunk on the night of the accident.

Appellants argue that though they may have profited from the illegal sale of the alcohol, any profit from that sale was disgorged following the award of punitive damages, which forced Nineteenth, SBE and Sabbah into bankruptcy. Appellants also highlight that no other civil actions or criminal sanctions have been sought against Appellants for this conduct. Appellants rely heavily on the idea that “a punitive damages award should sting, but should not destroy a defendant.” Appellants concluded their argument stating “the comparative reprehensibility of Caffee’s conduct, the lack of profit in light of the award, and Appellants’ financial position are factors weighing in favor of finding that the award is excessive.”

Appellees respond that Appellants did not argue that the wrongful death verdict was inconsistent with other similar cases, and thereby waived the issue. The Appellees highlight evidence from trial that the Appellants had engaged in a pattern and practice of selling alcohol to underage persons, and that the Appellants’ financial positions are not accurately stated. Specifically, Appellees emphasize that both SBE and Sabbah are covered by a $1,000,000 dram shop liability insurance policy, and point out the high cost and high risk taken by Appellees in their decision to litigate this case. Finally, Appellees argue that the statutory purpose behind punitive damages was served because “defendants’ illegal and immoral conduct demands punishment,” and that remitting a “remittitur in a dram shop wrongful death action based on defendant’s mere alleged inability to pay would eviscerate the Legislature’s goals . . . .”

Piercing the Corporate Veil

Alabama law recognizes that “the limitation of personal liability is a valid corporate attribute.”[9] However, Alabama courts have not hesitated to discard the separate corporate existence, “even in the absence of fraud or illegality, to prevent injustices or inequitable consequences.”[10] Alabama case law provides at least four findings that can be used to properly pierce the corporate veil: (1) inadequacy of capital; (2) fraudulent purpose in conception or operation of the business; (3) operation of the corporation as an instrumentality; and (4) operation of the subsidiary as an alter ego of the parent. Such findings are to be treated as evidentiary matters, and determined on a case-by-case basis.

In considering a trial court’s decision piercing the corporate veil, an appellate court uses the ore tenus standard of review, which “dictates that the trial court’s judgment is presumed correct and should be reversed only if the judgment is found to be plainly and palpably wrong, after consideration of all the evidence and after drawing all inferences that can logically be drawn from the evidence.”[11]

On appeal of the instant case, the Appellants argue that no presumption of correctness exists as to the trial court’s order piercing the corporate veil of Nineteenth. Appellants claim that the trial court erroneously adopted the Appellees’ proposed order, which contained a slanted recitation and omission of key facts. In support of this claim, the Appellants rely on the Supreme Court of Alabama’s assertions in Ex parte Ingram that “appellate courts must be careful to evaluate a claim that a prepared order drafted by the prevailing party and adopted by the trial court verbatim does not reflect the independent and impartial findings and conclusions of the trial court.” The Appellants argue that the Court must reverse the trial court’s piercing of the corporate veil due to the lack of independent and impartial findings in the Appellees’ proposed order, which contains factual assertions that the Appellants argue were improperly adopted by the trial court.

Further, the Appellants assert that there is a strong presumption in favor of upholding the corporate veil in Alabama, and that the trial court’s failure to apply the law to accurate and complete facts mandates reversal. Contrary to the trial court’s order, the Appellants argue that there is no evidence of substantial similarity of identity between Sabbah, Nineteenth, and SBE, noting that Sabbah, Nineteenth, and SBE had separate bank accounts, tax returns, and business-licenses. Additionally, the Appellants assert that the trial court’s order failed to provide proof of improper commingling of funds, inadequacy of capital in Nineteenth, or Sabbah’s fraudulent operations of Nineteenth.

In response, the Appellees assert that the trial court entered detailed findings of facts in the final order and take issue with the Appellants’ Ex parte Ingram analysis. Specifically, the Appellees explain that the judge that adopted the order in Ex parte Ingram did not preside over the trial or hear the evidence, while the trial judge in the instant case was the sole fact finder in the veil-piercing phase of the trial. Additionally, Appellees argue that there is substantial evidence to justify piercing the corporate veil, including proof of substantial similarity between Sabbah and the corporate defendants; lack of corporate formalities; no accounting controls or reconciliation for transfers between the corporations; comingling of mandatory liquor liability; undercapitalization of Nineteenth; and fraud in the operation of Nineteenth. Accordingly, Appellees contend that the trial court’s order piercing the corporate veils of Nineteenth and SBE must be upheld.


Calhoun v. State[12]

In the Alabama Court of Criminal Appeals

Oral Argument November 4, 2015

In the criminal proceeding before the Alabama Court of Criminal Appeals, Death Row inmate John Russell Calhoun appeals a capital murder verdict entered against him on the grounds that the trial court improperly dismissed his claims and that he is entitled to an evidentiary hearing on the issue of intellectual disability. Doctors who have evaluated Calhoun have reported him to be functionally illiterate with a below average IQ that classifies as mild mental impairment, though one doctor said Calhoun was malingering and was actually smarter than the IQ test indicated.

In 2005, the Court of Criminal Appeals determined that the death sentence imposed on Calhoun was neither disproportionate nor excessive. The court presented the underlying (and disturbing) facts as follows:

The appellant, John Russell Calhoun, was convicted of four counts of capital murder for murdering Tracy Phillips during the course of a robbery, during the course of a burglary, during the course of a sodomy, and during the course of a rape. The jury recommended, by a vote of 10 to 2, that Calhoun be sentenced to death. The circuit court accepted the jury’s recommendation and sentenced Calhoun to death.

The State’s evidence tended to show that on May 8, 1998, Calhoun entered L.P.’s and Tracy Phillips’s home in Talladega and shot and killed Tracy Phillips. L.P. testified that on the evening of May 8 her neighbor telephoned her to tell her that there was a man looking in the windows of her house. L.P. told her husband, Tracy, and Tracy went to check outside. When Tracy returned to the house Calhoun, who was wearing a stocking mask over his face, was following behind him with a gun. L.P. said that she knew that the man in the mask was Calhoun because he had been to their house that day and she had also seen him when she had been posting signs earlier that day for a yard sale she was having. L.P. said that she ran upstairs to one of the bedrooms to hide her daughter and her daughter’s friend and locked the bedroom door behind her. Moments later, she said, Tracy yelled from behind the door that Calhoun had a gun to his head and that if she did not open the door Calhoun would kill him. She complied and Calhoun entered the bedroom. Tracy pleaded for their lives and offered him money and jewelry. Calhoun declined and told L.P. to take off her clothes, get on the bed, and spread her legs. L.P. complied. Calhoun pushed Tracy’s head between his wife’s legs, held the gun to the back of Tracy’s head, and pulled the trigger. The coroner testified that Tracy died of a gunshot wound to the back of his head, which severed his brain stem.

After shooting Tracy, Calhoun dragged L.P. downstairs, where he raped, sodomized, and beat her. She said that at one point she struggled with Calhoun for the gun, he became enraged, and he pointed the gun at her and pulled the trigger, but the gun did not fire. Calhoun then raped her again and told her to get any money that she had upstairs. She refused to go back upstairs because her husband’s body was there, but she told Calhoun that she had jewelry in a downstairs bathroom. L.P. gave him some jewelry, he threw some of it down, and he left. L.P. then telephoned emergency 911.

A person matching Calhoun’s description was seen fleeing the murder scene. Neighbors also saw Calhoun’s car near the murder scene. One neighbor telephoned emergency 911. Police issued a “BOLO” for Calhoun’s vehicle. After police were unsuccessful in locating Calhoun’s vehicle, Charles Hedrick, a sheriff in the Talladega County Sheriff’s Department, went to the area where Calhoun’s mother lived and found Calhoun’s vehicle hidden in some bushes. The next morning police returned to the area and conducted an extensive search. Officer Wren Cooley of the Talladega Police Department spotted Calhoun in the area, pursued him on foot, but lost him. At one residence police obtained consent to search the homeowner’s house and discovered Calhoun hiding under a bed.

Forensic tests showed that the blood found on Calhoun’s discarded clothes was consistent with L.P.’s blood. DNA tests performed on semen collected from the victim was consistent with Calhoun’s DNA. Also, during the struggle between L.P. and Calhoun the two bit one another. A bite-mark expert testified that there was an extremely high probability that the bite mark on L.P.’s neck matched Calhoun’s dental impression and that the bite mark on Calhoun’s arm matched L.P.’s dental impression.

The jury convicted Calhoun of all four counts of capital murder—murder committed during a robbery, murder committed during a burglary, murder committed during a rape, and murder committed during a sodomy.

At the sentencing hearing Calhoun presented the testimony of Dr. Alvin Sheeley, a psychologist. Dr. Sheeley testified that Calhoun was close to meeting the clinical definition of having an impulse-control disorder. The State presented testimony that Calhoun had two prior convictions for attempted rape in the first degree and one prior conviction for sexual abuse in the first degree. The jury, by a vote of 10 to 2, recommended that Calhoun be sentenced to death.

Calhoun v. State, 932 So. 2d 923, 933–35 (Ala. Crim. App. 2005).

On December 6, 2006, with the assistance of new attorneys, Calhoun filed an initial petition for relief pursuant to Rule 32. He alleged three counts of ineffective assistance of counsel: (1) during the pretrial and guilt/innocence stages by failing to raise objections to certain evidence, jurors, and jury instructions; (2) during the penalty and sentencing stage by failing to investigate mitigating evidence, including evidence of Calhoun’s prior abuse; and (3) during the direct appeal by failing to explain in the first appeal why the Court of Criminal Appeals should remand the case back to the trial court for further factual development of the intellectual disability issue in light of Atkins. On the state’s motion, the trial court dismissed all three claims and Calhoun appealed.

Calhoun argues that the trial court should not have dismissed his claims and that he is entitled to an evidentiary hearing on the issue of intellectual disability. The State argues that the trial court properly dismissed the claims. The State also argues that a hearing is not warranted, because sufficient evidence was presented in the original case for the appellate court to determine that Calhoun did not “fit even the most broad definition of mental retardation.”


 

[1] Batson v. Kentucky, 476 U.S. 79 (1986) held that does not allow a party to use a peremporty challenge to exclude jurors based solely on their race.

[2] 476 U.S. 79, 86 (1986).

[3] See Looney v. Davis, 721 So. 2d 152, 164 (Ala. 1998).

[4] Ex Parte Floyd, 2012 WL 4465562 (Ala. 2012).

[5] Id.

[6] Ex Parte Branch, 526 So. 2d 609, 623 (Ala. 1987).

[7] Id. at 26.

[8] Green Oil Co. v. Hornsby, 539 So. 2d 218, 223-24 (Ala. 1989).

[9] Messick v. Moring, 514 So. 2d 893, 894 (Ala. 1987).

[10] Dupree v. Anderson, 505 So. 2d 1218, 1222 (Ala. 1987).

[11] Heisz v. Galt Indus., 93 So. 3d 918, 929 (Ala. 2012).

[12] The following is mainly adapted from summaries provided by the Birmingham Bar Foundation.


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