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KLLM Transport Services, LLC v. JBS Carriers, Inc.

United States District Court, S.D. Mississippi, Northern Division

December 22, 2017




         BEFORE THIS COURT is the defendant JBS Carriers, Inc.'s Motion to Remit Amount of Punitive Damages [Docket no. 224]. This motion stems from a years-long, extremely contentious litigation between the parties. After a careful review of the submissions of the parties, the relevant legal precedent, and the oral arguments of the parties, this court is convinced that JBS carrier Inc.'s Motion to Remit Amount of Punitive Damages [Docket no. 224] should not be granted for the reasons set forth below.

         I. BACKGROUND

         This case revolves around the termination of a “dedicated” hauling contract[1] and the breach of a settlement agreement. The salient background facts are as follows.

         In 2008, KLLM Transport Services, LLC (hereinafter referred to as “KLLM”), an over-the-road trucking company based in Mississippi, entered into a dedicated hauling contract with Pilgrim's Pride Corporation (hereinafter referred to as “PPC”), a chicken processing company. In 2010, PPC allowed its sister company, JBS Carriers Inc. (hereinafter referred to as “JBS”), to perform the dedicated hauling services for the PPC/KLLM contract. JBS, though, also allegedly began poaching some of the KLLM employees who had worked on the PPC dedicated hauling contract. Afterwards, an aggrieved KLLM sued JBS. KLLM contended that JBS had tortuously interfered with KLLM's business relationships, converted its proprietary trade secrets, and converted its customers. KLLM filed this lawsuit in this court, the United States District Court for the Southern District of Mississippi in case number 3:10-CV-546-HTW-LRA.

         With the court's help and encouragement, the two parties ultimately settled their differences out of court on December 1, 2010. [Docket no. 1-2]. In the settlement agreement, JBS agreed as follows:

The current contract between KLLM and Pilgrim's Pride shall be honored and continued for its stated duration and no early opt-out or termination of such contract will occur. KLLM will continue to provide services and pricing levels as stated in such contract.

[Docket no. 1-2, ¶ 5]. JBS further agreed that “JBS Carriers will not circumvent this Agreement or its obligations as set forth herein through any of its parent or affiliated companies.” [Docket no. 1-2, ¶ 8].

         Despite this settlement agreement, on December 13, 2011, PPC informed KLLM that it was terminating its dedicated hauling contract with KLLM. On February 17, 2012, KLLM filed this lawsuit in this federal court against JBS, contending that JBS had breached the settlement agreement in permitting PPC to terminate the dedicating hauling contract. [Docket no. 1]. In addition to compensatory damages, KLLM also requested punitive damages.

         This matter was brought to trial on August 19, 2015, before a jury of eight persons. After nine (9) days of trial, on September 1, 2015, the jury began its deliberation and returned a verdict in favor of KLLM. The jury awarded KLLM $36, 950.00 in contractual damages for JBS Carrier's breach of the settlement agreement. [Docket no. 216].

         The next day, on September 2, 2015, that same jury heard the punitive damages phase of trial. During its closing argument in the punitive damages phase of the trial, KLLM argued that JBS had violated the settlement agreement that it had entered into voluntarily just eleven months prior. KLLM also reiterated to the jury that JBS's counsel who penned the settlement agreement was the same attorney who terminated the KLLM-JBS contract less than a year later. JBS, said KLLM, terminated the contract to benefit itself because JBS's business was suffering and the PPC contract JBS took from KLLM doubled JBS's business. Just as KLLM had emphasized during the trial, KLLM characterized JBS' conduct as “reckless disregard for KLLM's rights.” [Docket no. 223, P. 7].

         JBS presented to the jury that PPC had decided to terminate KLLM's contract before they knew about the prior settlement agreement and that no JBS employees were involved in the decision to terminate KLLM's contract with PPC. The jury was not persuaded by JBS's arguments.

         JBS also presented what it purported to be its balance sheet. According to this balance sheet, JBS had only $38, 019.00 in cash-on-hand and a negative net worth of $71, 702, 835.00. [Docket no. 229, P. 27]. KLLM did not object to this document being admitted into evidence. KLLM, though, did question the veracity of this balance sheet, emphasizing in closing argument that JBS was “working for these other companies in the family that are huge companies. They've got money coming in. I submit that if you make the award, which I trust you to do with proper and sound judgment as the court instructed you, they will find a way pretty easily to pay it.” [Docket no. 223].

         The jury, after due deliberation, awarded KLLM $900, 000.00 in punitive damages. [Docket no. 218].


         This court earlier confirmed that it possesses diversity of citizenship subject-matter jurisdiction over this dispute in its orders dated July 26, 2013 [Docket no. 137], and August 17, 2015 [Docket no. 204]. Inasmuch as diversity of citizenship is the subject matter jurisdictional trigger, this court, sitting in Mississippi, will apply Mississippi law to the substantive issues in accordance with the Erie Doctrine. Erie v. Tompkins, 304 U.S. 64, 78-79, 58 S.Ct. 817, 82 L.Ed. 1188 (1938). Under the Erie Doctrine, federal courts sitting in diversity must apply state substantive law and federal procedural law. Foradori v. Harris, 523 F.3d 477, 486 (5th Cir. 2008) (citing Gasperini v. Ctr. for Humanities, Inc., 518 U.S. 415, 426-427 (1996)).


         a. Mississippi Punitive Damages Law

         Defendant JBS first asks this court to remit the amount of damages the jury awarded to KLLM to zero ($0.00), allegedly in accordance with Mississippi law. JBS travels under Miss. Code Ann. § 11-1-65(3)(a), which authorizes the reduction of a plaintiff's punitive damages award depending on the net worth of the defendant. Section 11-1-65 (2004) recites:

In any civil action where an entitlement to punitive damages shall have been established under applicable laws, no award of punitive damages shall exceed the following:
(vi) Two percent (2%) of the defendant's net worth for a defendant with a net worth of Fifty Million Dollars ($50, 000, 000.00) or less.

         This limitation on punitive damages “shall not be disclosed to the trier of fact.” Miss. Code Ann. § 11-1-65(3)(c). In other words, the jury deliberates in the blind relative to the possibility that, under the law, the court may be required to reduce the award dependent on the net worth of the defendant.

         The statute further mandates that “[f]or the purposes of determining the defendant's net worth in paragraph (a), the amount of the net worth shall be determined in accordance with Generally Accepted Accounting Principles.” Miss. Code Ann. § 11-1-65(3)(b). Generally Accepted Accounting Principles are acceptably defined as “the official standards adopted by the American Institute of Certified Public Accountants (the “AICPA”), a private professional association, through three successor groups that it established, the Committee on Accounting Procedure, the Accounting Principles Board (the “APB”), and the Financial Accounting Standards Board (the “FASB”).'” In re Enron Corp. Sec., Derivative & ERISA Litig., 235 F.Supp.2d 549, 573, fn. 11 (S.D. Tex. 2002)(citing In re K-tel Intern., Inc. Securities Litigation, 300 F.3d 881, 889 (8th Cir.2002), quoting Ganino v. Citizens Utils. Co., 228 F.3d 154, 160 n. 4 (2d Cir.2000)).

         JBS contends that KLLM now may not present any argument or evidence contradicting JBS' balance sheet, especially the negative net worth, because KLLM did not present challenging evidence at trial before the jury. In support of this argument, JBS cites two cases: C & C Trucking Co. v. Smith, 612 So.2d 1092 (Miss. 1992) (“Smith”) and Coleman & Coleman Enter., Inc. v. Waller Funeral Home, 106 So.3d 309 (Miss. 2012) (“Coleman”). This court, though, is not persuaded that these two cases bemuscle JBS' position.

         Smith is a 1992 case that was decided before the Mississippi Legislature adopted the punitive damages scheme described in Miss Code Ann. § 11-1-65. In Smith, the plaintiff appealed the trial court's decision to remit the jury's punitive damages award from $50, 000.00 to $0.00. Id. The trial court based its remittitur on the defendant's argument that the jury had not been informed of the defendant's net worth, which was $0.00. Smith, 612 So.2d at 1105.

         The Mississippi Supreme Court reversed the trial court's remittitur, announcing:

We hold that it is not legally necessary for either plaintiff or defendant to introduce evidence of the net worth of the defendant during the trial to support an award of punitive damages. If, however, no such evidence is presented, neither party may challenge on appeal either the inadequacy or the excessiveness of a punitive damages award. If a party wishes to preserve the question for appeal, evidence of net worth must be presented at trial, or error in the amount of punitive damages is waived.

Id. at 1105.

         Unlike Smith, Coleman, a 2012 case, was decided after the Mississippi Legislature adopted the punitive damages scheme described in Miss. Code Ann. § 11-1-65. During the punitive phase in Coleman, the counter-defendant, Coleman, speculated that it “had little or no net worth” and that it “had some measure of outstanding debt.” Coleman further represented that it had no equity in the funeral home. The counter-plaintiff, Waller, conducted no cross-examination on this point. ...

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