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Released Opinions

September 22, 2014

The Supreme Court of Georgia released opinions in 32 cases this morning, six of which are within the scope of our coverage. We apologize for the lack of updates last week, as travel interfered with our regular posts.

The Court will also be hearing oral argument this morning and we will update later today with those cases.

Summaries of the cases decided with links to the opinions are below.

S13G1711 Lafarge Building Materials, Inc. v. Thompson

This case involves a dispute over a personal guaranty on a debt. In 2007, the company Thompson owned applied for a line of credit from LaFarge to purchase building supplies. Thompson filled out the application paperwork for his company to obtain credit, including signing a Continuing Guaranty section titled “Signature of Individual Guarantor.” Thompson’s company failed to pay more than $53,000 and LaFarge sued. The trial court granted summary judgment to LaFarge finding, among other things, that Thompson’s signature constituted a personal guaranty. The trial court then entered a judgment of $105,147 and Thompson appealed.

The Court of Appeals reversed the trial court in a 5-2 decision (Doyle, Phipps, Ellington, McFadden concurring; Barnes concurring in judgment only; Boggs and Branch dissenting). Writing for the majority, Judge Doyle explained that the Continuing Guaranty section did not sufficiently incorporate the rest of the application because it did not define who the Applicant was. The majority said this outcome was dictated by its prior decision in another case, LaFarge v. Pratt. Because there was no name of the principal debtor, the Statute of Frauds was not satisfied. In dissent, Judge Boggs would have found the guaranty satisfied the Statute of Frauds because there was only an ambiguity in the name of the Applicant, which could be solved through parol evidence.

On January 6, 2014, the Supreme Court of Georgia unanimously granted the petition for certiorari to review the following question:

  1. Did the Court of Appeals err in holding that the guaranty agreement at issue here did not identify the principal debtor with sufficient specificity to satisfy the Statute of Frauds? Compare Capital Color Printing, Inc. v. Ahern, 291 Ga. App. 101 (661 SE2d 578) (1) (2008), with LaFarge Building Materials, Inc. v. Pratt, 307 Ga. App. 767 (706 SE2d 131) (1) (2011).

The case was heard on April 21, 2014.

On September 22, 2014, the Supreme Court unanimously reversed the Court of Appeals decision. Writing for the Court, Justice Nahmias explained that the debtor was identified sufficiently to satisfy the Statute of Frauds. The term used to define the debtor in the agreement should carry its usual meaning and as a result, the “Applicant” was sufficiently identified. The Court reiterated that the better practice is to include the name of the principal debtor in the guaranty.

S13G1812 Metropolitan Atlanta Rapid Transit Authority v. Reid

The case began when Reid was injured while an employee of MARTA in October 1999. Reid timely filed for worker’s compensation benefits and MARTA made 32 payments to him based on his temporary total disability before he was able to return to work in 2002. But 12 of those 32 payments were untimely or late based on the worker’s compensation statute. Reid did not raise any issues at the time. In 2010, Reid’s attorney requested MARTA pay the statutory penalty of 15% for each of the 12 late payments. MARTA refused, saying the demand was barred by the statute of limitations. Reid then filed a hearing request with the State Board, which denied the request. The Appellate Division of the State Board affirmed the denial, as did the Fulton County Superior Court. Reid filed an application for discretionary appeal, which the Court of Appeals granted.

The Court of Appeals (Branch and Ellington; Phipps concurring in judgment only) unanimously reversed the superior court decision, finding that the request was not a request for additional benefits resulting from a “change in condition.” That kind of request would be barred by the two-year statute of limitations contained in the worker’s compensation statute. Reid’s request was not a change in condition because it was not a change in status. In addition, the request is based on the initial claim for benefits, not a modification of a prior decision. As a result, the only statute of limitation which is relevant is the general statute on filing an initial claim, which was met because his claim was timely filed originally.

On January 6, 2014, the Supreme Court unanimously granted the petition for certiorari to consider the following question:

  1. Did the Court of Appeals err in holding that the proper statute of limitations for a claim of statutory penalties for late benefits payments in workers’ compensation cases under OCGA § 34-9-221 is the general statute of limitations, OCGA § 34-9-82, rather than OCGA § 34-9-104 (b), the change in condition statute of limitations?

The Court heard oral argument on the case on April 7, 2014.

On September 22, 2014, the Supreme Court unanimously reversed the Court of Appeals. Writing for the Court, Chief Justice Thompson explained that the Code provides for two limitation periods: one for “all issues” claims and the other for a “change in condition” claim. While the Court of Appeals correctly found the employee did not undergo a change in capacity or physical condition, it did not consider whether he underwent a change in “status.” The employee’s status (his legal condition in connection with his employer) was established when benefits began and was last established when the last payment was made. Because the demand came more than two years after the additional income benefits were paid, his claim was barred by the two-year statute of limitations.

S14G0360 State of Georgia Dept. of Corrections v. Developers Surety and Indemnity Co.

This case began with a contract to re-roof buildings at Valdosta State Prison. In 2008, the Department of Corrections awarded the re-roofing project to Walker Roofing. Walker Roofing secured the required bonds from Developers Surety and began work near the end of 2008. The contract required Walker to complete the work within 150 calendar days, but the work was not completed by September 2010. The contract also stated that Walker was to have access to work areas between 7:30 am and 5:00 pm each weekday, but the Department imposed delays each day and required workers to be offside by 4:30 pm, requiring workers to stop work at 3:30 pm. When the Department issued its notice of default in 2010, it triggered the performance bond provisions, but Developers Surety failed to notify the Department which entity would complete the project until three months later. Developers Surety sued the Department in 2011 for breach of contract and a declaration that it had no obligation under the payment and performance bond provisions. The trial court found the claims were not barred by sovereign immunity and granted Developer Surety’s motion for summary judgment, awarding it $577,118.60.

The Court of Appeals (Ray, Barnes, Miller) unanimously affirmed the trial court decision, finding that the fact that Developers Surety was not a party to the contract did not prevent the contract from waiving sovereign immunity. Equitable subrogation allowed Developers Surety to step into the shoes of Walker once it had liability, and that included the waiver of sovereign immunity in the agreement. The Court of Appeals also found the grant of summary judgment was proper, in part because of the facts deemed admitted by the Department when it failed to respond to requests for admission. Because Developers Surety had no obligation due to the Department’s breach, the failure to notify the Department which entity would complete the project did not create a claim by the Department.

On March 3, 2014, the Supreme Court of Georgia unanimously granted the petition for certiorari to consider the following question:

  1. Whether the State’s sovereign immunity is waived for a claim asserted by a surety on a contract with the State, Ga. Const. Art. I, Sec. II, Para. IX (a)?

The case was heard on May 5, 2014.

On September 22, 2014, the Supreme Court unanimously affirmed the Court of Appeals decision. Writing for the Court, Presiding Justice Hines explained that sovereign immunity is waived for breach of contract actions. While it is clear that the Department waived sovereign immunity for breach of contract actions and that Walker Roofing could have maintained an action against the Department for breach of contract, the statute also allows Developers Surety to “succeed” to the rights of Walker Roofing. The waiver of sovereign immunity for purposes of breach of contract addresses the “action,” not which party may bring the action.

S14A0620 Barzey v. City of Cuthbert

This case began when Deron Shorter was killed in 2010 while operating a mower for the City of Cuthbert. Shorter was not married and did not have any dependents, so the City denied his mother’s claim for his death benefit under the Worker’s Compensation Act. Barzey sued, claiming the statute’s limitations on death benefits to dependents (instead of heirs) violates the Equal Protection clause. The trial court granted summary judgment to the City and Barzey appealed.

The case was originally set to be heard on April 21, 2014, but was postponed and was heard on June 16, 2014.

On September 22, 2014 the Supreme Court unanimously affirmed the trial court decision. Writing for the Court, Justice Nahmias first addressed the jurisdictional issues, finding that the case was properly before the Supreme Court because she asserted constitutional claims in the trial court. The fact that the trial court ruled 13 days after the summary judgment motion was filed (before Barzey could respond) did not require reversal because Barzey could not show any harm. The trial court properly found that the Worker’s Compensation Act does not violate her rights to due process and equal protection by preventing her, as a non-dependent heir, from recovering for her son’s death. It is not irrational for the legislature to treat dependent and non-dependent heirs differently, and the legislature also had a rational basis for requiring payment into the public treasury when someone dies and leave no dependents.

S14Q0623 Federal Deposit Ins. Corp. v. Skow et al.

This case involves the actions of Integrity Bank, which made loans in excess of $500,000, allegedly engaging in high risk lending practices, ultimately leading to losses exceeding $70 million when the bank failed in 2008. The FDIC was appointed as the receiver and sued several members of the Bank’s Director Loan Committee, claiming ordinary negligence and breach of fiduciary duty based on ordinary negligence. The directors filed a motion to dismiss based on Georgia’s business judgment rule, claiming the FDIC failed to rebut the presumption of good faith. (Another case involving the business judgment rule and banks was argued in April.)

The Northern District of Georgia dismissed the claims for ordinary negligence and breach of fiduciary duty, finding they were precluded as a matter of law by the business judgment rule. The district court then certified its order for interlocutory appeal, which the Eleventh Circuit granted.

After finding the issue to be an unresolved question of Georgia law, the Eleventh Circuit unanimously certified the following questions to the Supreme Court of Georgia:

  1. Does a bank director or officer violate the standard of care established by O.C.G.A. § 7-1-490 when he acts in good faith but fails to act with “ordinary diligence,” as that term is defined in O.C.G.A. § 51-1-2?
  2. In a case like this one, applying Georgia’s business judgment rule, can the bank officer or director defendants be held individually liable if they, in fact as alleged, are shown to have been ordinarily negligent or to have breached a fiduciary duty, based on ordinary negligence in performing professional duties?

The case was heard on May 19, 2014.

On September 22, 2014, the Supreme Court unanimously answered the certified questions (Nahmias, disqualified; Judge Dillard sitting by designation, concurring). Writing for the Court, Justice Hunstein explained that the Court’s earlier Loudermilk decision answered the questions. A bank officer may violate the standard of care, even when he or she acts in good faith, if he or she fails to exercise the skill of ordinarily prudent men in similar circumstances and lie positions. They can also be held individually liable if they violated the standard of care explained in Loudermilk.

S14A0784 Advanced Disposal Services Middle Ga., LLC v. Deep South Sanitation, LLC et al.S14A0785 Lowndes County v. Deep South Sanitation, LLC et al.

This case involves the constitutionality of an ordinance involving the curbside pickup of trash in Lowndes County. Before 2013, a number of private companies offered curbside pickup for residents of unincorporated Lowndes County, with the County also offering the option for individuals to pay to take their trash to six solid waste collection centers. After determining the collection centers were too expensive to operate, the County solicited proposals, ultimately adopting an ordinance prohibiting any company from picking up solid waste from residents without a franchise or temporary permit. An exclusive franchise was given to Advanced Disposal Services. Deep South continued offering curbside pickup in spite of the ordinance and the County sued. The trial court found the ordinance unconstitutional and required the County to continue allowing Deep South to operate in a “legal manner.” The County and Advanced Disposal appealed.

The case was heard on May 19, 2014.

On September 22, 2014, the Supreme Court unanimously reversed the trial court decision. Writing for the Court, Chief Justice Thompson explained that the proper test to the constitutional challenge to the ordinance was rational basis. Applying that test, the trial court erred in finding a violation of Deep South’s due process rights because the regulation of collection and disposal of solid waste serves a legitimate public purpose of protecting the health, safety, and welfare of the people. The Board’s decision to enact the ordinance was rational because of the money it was losing and because such a plan could discourage illegal dumping in the county. Because the ordinance serves a legitimate purpose by rational means necessary to achieve that purpose, it does not violate Deep South’s substantive due process rights and the trial court erred by refusing to enter an injunction.

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