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State v. Overstock.Com, Inc.

Superior Court of Delaware

June 28, 2019

THE STATE OF DELAWARE, Plaintiff, ex. rel.
v.
OVERSTOCK.COM, INC., Defendant. WILLIAM SEAN FRENCH, Plaintiff-Relator,

          Submitted: March 21, 2019

          ORDER FOR ENTRY OF FINAL JUDGMENT UNDER SUPERIOR COURT CIVIL RULE 54(B) FOR DAMAGES AND PENALTIES

          Paul R. Wallace, Judge.

         Upon consideration of the Motion for Entry of Final Judgment Under Superior Court Civil Rule 54(b) (the "Motion") filed by the State of Delaware and Plaintiff-Relator William Sean French ("Plaintiffs") (D.I. 988); the Post-Verdict Memorandum of Law on Plaintiffs' Remedies (the "Remedies Memorandum") filed by Defendant Overstock.com, Inc. ("Overstock") (D.I. 991); Overstock's Response in Opposition to Plaintiffs' Request for Attorneys' Fees and Costs (the "Opposition") (D.I. 992); the oral arguments presented by the parties on the Motion, the Remedies Memorandum and the Opposition (D.I. 1016); the supplemental letters filed by the Plaintiffs and Overstock (D.I. 1018; D.I. 1019); and the complete record of this proceeding:

         (1) After a six-day trial in September, 2018, a jury found Overstock to have knowingly violated the Delaware False Claims and Reporting Act ("DFCRA") by failing to report and remit dormant gift card balances to the State of Delaware. The total amount of the jury verdict was $2, 953, 826.40 for violations of the DFCRA in 2010, 2011, 2012 and 2013. Prior to submission to the jury, the parties stipulated that any potential damages judgment would be reduced by 18% to reflect the maximum cost of goods sold as permitted by the DFCRA. That reduces the verdict to $2, 422, 137.65.

         (2) Post-verdict, Plaintiffs filed their Motion requesting that the Court enter judgment in the amount of $10, 846, 294.77, consisting of: (a) civil penalties in the amount of $44, 000; (b) treble damages in the amount of $7, 266, 412.94; (c) attorneys' fees in the amount of $2, 756, 225.60[1]; and (d) costs in the amount of $779, 656.23.

         (3) Overstock filed its Remedies Memorandum proposing: (a) civil penalties in the amount of $22, 000; (b) a reduction to the treble damages requested by Plaintiffs; and (c) an award of attorneys' fees calculated via the lodestar method.[2]

         (4) Overstock then filed its Opposition more directly addressing Plaintiffs' request for attorneys' fees and costs in the amount of $3, 535, 881.83. According to Overstock, Plaintiffs failed in their submission to demonstrate that the specific fees and costs claimed are reasonable or reasonably related to Plaintiffs' claims against Overstock and the Court should simply reject their request. If not, Overstock says, the Court should at least reduce said amount via calculation using the relevant factors set out in 6 Del. C. § 1205(a).

         (5) Section 1205(a)-DFCRA's damages and penalties provision-reads:

Any person who . . . [k]knowingly makes, uses, or causes to be made or used a false record or statement material to an obligation to pay or transmit money or property to the Government, or knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money to the Government shall be liable to the Government for a civil penalty of not less than $5, 500 and not more than $11, 000 for each act constituting a violation of this section, plus 3 times the amount of damages which the Government sustained because of the act of that person.[3]

         (6) DFCRA's § 1205(a) further requires a violator to pay "the costs of a civil action brought to recover any such penalty or damages, including payment of reasonable attorneys' fees and costs."[4] With respect to the determination of reasonable attorneys' fees and costs, the statute provides:

[T]he court shall consider, without limitation, whether such fees and costs were necessary to the prosecution of the action, were incurred for activities which were duplicative of the activities of the Department of Justice in prosecuting the case, or were repetitious, irrelevant or for purposes of harassment, or caused the defendant undue burden or unnecessary expense.[5]

         (7) So, as the prevailing party, Plaintiffs are entitled to an award comprised of civil monetary penalties, treble damages, and reasonable attorneys' fees and costs under § 1205(a).

         The Court Will Enter A Final Judgement on Penalties and Damages

         (8) Superior Court Civil Rule 54(b) allows the Court to "direct the entry of a final judgment upon one or more but fewer than all of the claims or parties only upon an express determination that there is no just reason for delay . . . ."[6]

         (9) In deciding whether there is "just reason for delay," the Court must consider: "(1) the hardship or injustice suffered by the moving party in the absence of the final judgment; and (2) the interest of judicial administration and judicial economy."[7] This decision is left to the discretion of the Court; however, the long- established policy against piecemeal appeals requires this Court to exercise that discretion "sparingly," "cautiously," and "frugally."[8]

         (10) The Court finds that there is no just reason for delay in entering final judgment in this case with respect to the award for penalties and treble damages while the Court resolves the remaining issues regarding attorneys' fees and costs. Plaintiffs have articulated concerns regarding their ability to collect on any judgment against Overstock due to the reported impending sale of the company. The Court finds that if such a sale rendered Plaintiffs unable to collect its damage award, hardship and injustice would be suffered. This is especially true given the fact that Plaintiffs began litigating the issues in this suit in 2013.

         (11) In resolving the amount of the verdict and damage award, the Court has considered Overstock's arguments that, in its view, the amount of the trebled damages "is both inappropriate and excessive."

         Sufficient Evidence Supported the Jury's Verdict on Damages.

         (12) The Court is unpersuaded by Overstock's post-verdict claims of insufficient evidence to support the jury's damages finding here. The Court continues to abide by its rulings made when it admitted the evidence from which this figure was derived. As the jury was properly instructed, the damages derived from Overstock's DFCRA violations need not be established by Plaintiffs "with mathematical precision, but the law does not permit recovery of damages based only on speculation or conjecture. Rather, there must be a reasonable basis for determining the damages that are alleged here-that is, the unredeemed gift card values that Overstock had an obligation to report and transmit under Delaware's Unclaimed Property Law."[9]

         (13) That instruction and the jury's verdict are consistent with a reasonable view of the facts and Delaware law. Plaintiffs were required to prove their damages by a preponderance of the evidence.[10] Delaware does not "require certainty in the award of damages where a wrong has been proven and injury established."[11] Indeed, "[t]he quantum of proof required to establish the amount of damage is not as great as that required to establish the fact of damage."[12] Responsible estimates of damages that lack mathematical certainty are permissible so long as the fact finder had a basis to make such a responsible estimate.[13] Here the jury did-Overstock's own reporting to Card Compliant. To the extent Overstock says those records were unreliable or not fully understood, Overstock was free to and did present its counter evidence to the jury. Unfortunately for Overstock, the jury did not accept its self-serving, after-the-fact accounting of what should have been reported, what was redeemed, or what should have been transmitted.

         (14) Public policy has led Delaware and other courts to show a general willingness to make a wrongdoer "bear the risk of uncertainty of a damages calculation where the calculation cannot be mathematically proven."[14] And when the extent of damages is made more difficult to ascertain by the nature of the wrongful act itself, it would be "a perversion of fundamental principles of justice" to deny reasonable and adequate relief to the injured and relieve the wrongdoer from making adequate amend for his act.[15] Given the totality of the trial record, the Court simply cannot agree with Overstock. The Court need only assure itself that when setting damages the jury did not overlook some lack of Plaintiffs' proof on the issue and "supply the omission by speculation or conjecture."[16] A review of the entire trial record supports the jury's finding here was based on evidence, not speculation.

         (15) Our Supreme Court has been very clear: "Under Delaware law, enormous deference is given to jury verdicts" on damages.[17] The same principles applied in other post-verdict challenges to damage verdicts (e.g. Additur and Remittitur) guide the Court here. "[A]s a practical test, a court presented with a request [to substitute its own judgment for the jury's] must review the record and determine whether the jury's award of damages is within a range supported by the evidence."[18] Here, the Court has. And "[a]s long as there is a sufficient evidentiary basis for the amount of the award, the jury's verdict should not be disturbed."[19] Here, there is; so this jury's verdict will not be.

         Statutorily Mandated Treble Damases Are Not Excessive

         (16) DFCRA's § 1205(a) provides that a false claims violator "shall be liable to the Government for ... 3 times the amount of damages which the Government sustained because of the act of that person."[20] The parties agree that were jury's adjusted damages award trebled, the result would be $7, 266, 412.94. Such an award of damages, Overstock says, is unconstitutional under the Excessive Fines Clauses of the Eighth Amendment of the United States Constitution and ...


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