SRM Grp., Inc. v. Travelers Prop. Cas. Co. of Am.

308 Ga. 404

841 S.E.2d 729

SRM GROUP, INC.

v.TRAVELERS PROPERTY CASUALTY COMPANY OF AMERICA.

S19G0473

Supreme Court of Georgia.

Decided: April 6, 2020

Schoenthaler Law Group, Peter Frederick Schoenthaler, Neill Kinnett Wright, Ann Reinig Emery, Josephine Elizabeth Graddy, for Appellant.

Savell & Williams, William E. Turnipseed, David M. Gram, for Appellee.

Bethel, Justice.

We previously held in Byers v. McGuire Properties, Inc. , 285 Ga. 530, 540 (6), 679 S.E.2d 1 (2009), that a counterclaimant asserting an independent compulsory counterclaim could not seek attorney fees and litigation expenses under OCGA § 13-6-11. For the reasons explained below, we now conclude that holding was erroneous. A defendant who brings a counterclaim against a plaintiff becomes the plaintiff as to that counterclaim. Thus, a plaintiff-in-counterclaim asserting an independent claim may seek, along with that claim, attorney fees and litigation expenses under OCGA § 13-6-11, regardless of whether the independent claim is permissive or compulsory. We find no compelling reason under a stare decisis analysis to cling to the holding in Byers . Accordingly, we overrule our holding in Byers and in Sponsler v. Sponsler , 287 Ga. 725, 728 (2) n.2, 699 S.E.2d 22 (2010), where we followed Byers in a footnote, and similar holdings by the Court of Appeals. And we reverse the part of the opinion of the Court of Appeals in this case that follows Byers .

1. Background.

The facts, as set forth by the Court of Appeals, are as follows:

Travelers Property Casualty Company of America ("Travelers") filed suit against SRM Group, Inc. ("SRM"), seeking to recover unpaid premiums due under a workers’ compensation insurance policy. In response, SRM asserted counterclaims against Travelers for breach of contract, breach of duty of good faith and fair dealing, and attorney fees based on Travelers’ audit of SRM's employee risk classifications and subsequent refusal to reclassify those employees, which resulted in a substantial retroactive increase in the premium. Following a four-day trial, the jury awarded $174,858 in damages to Travelers based on SRM's failure to pay some of the alleged increased premium due under the policy. However, the jury found that Travelers had also breached the contract and acted in bad faith in conducting the audit and in subsequently refusing to reclassify certain SRM employees. Accordingly, the jury awarded damages to SRM in the aggregate sum of $174,858, which consisted of $57,858 for the breach and $117,000 in bad faith attorney fees. Travelers filed a motion for judgment notwithstanding the verdict or, in the alternative, motion for new trial. Following a hearing, the trial court denied the motions.

Travelers Prop. Casualty Co. of America v. SRM Group, Inc. , 348 Ga. App. 136, 136-137, 820 S.E.2d 261 (2018).

Travelers appealed, contending that the trial court erred in denying the motion for judgment notwithstanding the verdict on SRM's counterclaims for breach of contract and bad faith attorney fees, and in denying the motion for new trial. The Court of Appeals affirmed the verdict in favor of SRM, but in Division 2 of its opinion reversed the verdict against Travelers on SRM's counterclaim for attorney fees pursuant to OCGA § 13-6-11 because the request for attorney fees was based on a compulsory counterclaim for breach of contract that was not independent of Travelers’ claim for breach of contract. Travelers, 348 Ga. App. at 141-142 (2), 820 S.E.2d 261. We granted SRM's petition for certiorari to consider whether the Court of Appeals correctly determined that a plaintiff-in-counterclaim asserting a compulsory counterclaim is precluded from seeking an award for the expenses of litigation under OCGA § 13-6-11.¹

2. In Byers , we relied on a Court of Appeals decision, Sanders v. Brown , 257 Ga. App. 566, 571 S.E.2d 532 (2002), in holding that "a plaintiff-in-counterclaim cannot recover attorney's fees under OCGA § 13-6-11 unless he asserts a counterclaim which is an independent claim that arose separately from or after the plaintiff's claim."² 285 Ga. at 540 (6), 679 S.E.2d 1. That is, attorney fees could only be sought under OCGA § 13-6-11 where a plaintiff-in-counterclaim was asserting a permissive, as opposed to a compulsory, counterclaim.³ However, we now conclude that Sanders , and by extension, Byers , were incorrectly decided on these points.

The general rule is that "an award of attorney fees and expenses of litigation are not available to a prevailing party unless authorized by statute or contract." Cary v. Guiragossian , 270 Ga. 192, 195 (4), 508 S.E.2d 403 (1998). To that end, OCGA § 13-6-11 allows for attorney fees and litigation expenses "where the plaintiff has specially pleaded and has made prayer therefor and where the defendant has acted in bad faith, has been stubbornly litigious, or has caused the plaintiff unnecessary trouble and expense[.]"⁴

When a defendant files a claim independent from the initiating plaintiff's claim, the defendant becomes a plaintiff for the purposes of that counterclaim; that is, he is a plaintiff-in-counterclaim. See Beall v. F.H.H. Constr., Inc. , 193 Ga. App. 544, 546 (4), 388 S.E.2d 342 (1989) (defendant "was, in effect, a plaintiff in the independent counterclaim"). In order for a plaintiff-in-counterclaim to assert a claim for attorney fees and litigation expenses under OCGA § 13-6-11, that party must also have another claim that is separate, or free-standing, from the OCGA § 13-6-11 claim. See Steele v. Russell , 262 Ga. 651, 651 (2), 424 S.E.2d 272 (1993) (damages under OCGA § 13-6-11 "are available to a defendant only where the defendant has brought a counterclaim asserting a claim for relief wholly independent of any assertion as to plaintiff's bad faith, litigiousness, and/or harassment in bringing the underlying action"). See also Beall , 193 Ga. App. at 546 (4), 388 S.E.2d 342 (defendant who was sued by plaintiff construction company for alleged overpayments, slander of title, and removal of a lien on his property in connection with a building contract "was, in effect, a plaintiff in the independent counterclaim for [the construction company's] breach of contract" and thus could recover expenses of litigation under OCGA § 13-6-11 (citation and punctuation omitted)); Glenn v. Fourteen West Realty, Inc. , 169 Ga. App. 549, 551 (2), 313 S.E.2d 730 (1984) (in plaintiff homebuyer's suit against realtor for fraudulent inducement, realtor's counterclaim for real estate commissions was an "independent counterclaim" and thus realtor could recover expenses of litigation under OCGA § 13-6-11 ); Ballenger Corp. v. Dresco Mechanical Contractors, Inc. , 156 Ga. App. 425, 432 (III) (A) (1), 274 S.E.2d 786 (1980) (defendant brought counterclaims in addition to its claim for attorney fees and therefore was not barred from seeking expenses of litigation); Homac, Inc. v. Fort Wayne Mtg. Co. , 577 F.Supp. 1065, 1072 (III) (N.D. Ga. 1983) (defendant permitted to seek recovery under OCGA § 13-6-11 where it asserted counterclaim for conversion). A plaintiff-in-counterclaim cannot recover under OCGA § 13-6-11 unless he prevails on his independent claim. See Hamil v. Stanford , 264 Ga. 801, 802 (3), 449 S.E.2d 118 (1994). See also Gibson v. Southern Gen. Ins. Co. , 199 Ga. App. 776, 777 (1), 406 S.E.2d 121 (1991) ; Fla. Rock Indus., Inc. v. Smith , 163 Ga. App. 361, 363 (3), 294 S.E.2d 553 (1982). Thus, a dismissal or loss at trial on an independent claim would mean a loss on a claim under OCGA § 13-6-11, as well. See Alcovy Props., Inc. v. MTW Inv., Co. , 212 Ga. App. 102, 104 (5), 441 S.E.2d 288 (1994) ( OCGA § 13-6-11 claim could not survive independent of dismissal of defendant's other counterclaims), overruled on other grounds by Coen v. Aptean, Inc. , 307 Ga. 826, 838 S.E.2d 860 (2020) ; White v. Lance H. Herndon, Inc. , 203 Ga. App. 580, 581 (4), 417 S.E.2d 383 (1992) ( § 13-6-11 claim could not proceed independently following loss on all other claims). Stated differently, claims under OCGA § 13-6-11 must always travel with a viable and distinct (i.e., "independent") cause of action.

However, in Sanders , the Court of Appeals appeared to equate "independent" with permissive when it held that a plaintiff-in-counterclaim cannot recover under OCGA § 13-6-11 "where there is a compulsory counterclaim." 257 Ga. App. at 570 (c), 571 S.E.2d 532. We see no basis in the text of the statute or otherwise for such an equation.

As a preliminary matter, none of the cases relied on by the Court of Appeals in Sanders stands for the proposition for which they were cited, namely that a plaintiff-in-counterclaim cannot recover under OCGA § 13-6-11 when he asserts a compulsory counterclaim. See Alcovy , 212 Ga. App. at 104 (5), 441 S.E.2d 288, White , 203 Ga. App. at 581 (4), 417 S.E.2d 383, and Vogtle v. Coleman , 259 Ga. 115, 376 S.E.2d 861 (1989). First, in Alcovy , the plaintiff filed a complaint and notice of lis pendens seeking the cancellation of deeds conveying real property to the defendant, and the defendant asserted numerous counterclaims in response. See 212 Ga. App. at 102, 441 S.E.2d 288. However, all of the defendant's counterclaims were dismissed. On appeal, the defendant argued that the trial court erred in dismissing its claim for litigation expenses. The Court of Appeals rightly disagreed, holding that because the defendant "made no showing that it asserted a viable counterclaim for relief independent of its claim of [the plaintiff's] stubborn litigiousness and bad faith, expenses of litigation pursuant to OCGA § 13-6-11" were not available to the defendant. 212 Ga. App. at 104 (5), 441 S.E.2d 288. Thus, Alcovy did not address whether a compulsory counterclaim constitutes an "independent" claim for the purposes of OCGA § 13-6-11. Instead, it merely affirmed the requirement of a viable independent claim.

In White , a business sued one of its independent contractors for breach of contract when the...