COA affirms defamation verdict but tosses punitive damages

The Indiana Court of Appeals deconstructed a tangle of lawsuits erupting over allegations of theft of more than $1 million from a home building company and ruled that although the accused was found to have breached his fiduciary duty and wrongly taken money, he was still defamed by his accuser.

J. Greg Allen Builder, Inc. (GABI), and Princeton Homes filed suit against Jeff West, the former company president, after their investigation revealed numerous accounting discrepancies and financial irregularities.

Allen then sent a letter through GABI and Princeton to customers, subcontractors and suppliers in Marion and Johnson counties, alerting them to West’s alleged actions. In particular, Allen asserted that West and Kim Hutchinson, West’s assistant, made over 100 unauthorized withdrawals from company funds in excess of $1 million.

West then filed a counterclaim for defamation because of that letter.

After an 11-day trial in Johnson Superior Court in 2016, the jury found in favor of GABI on the theft claim in the amount of $4,000 and on the breach of fiduciary duty claim in the amount of $220,000. It also ruled in favor of West for defamation, awarding him presumed damages of $50,000 and punitive damages of $300,000. The award for punitive damages was later reduced to $150,000.

Both West and Allen appealed to the Court of Appeals in Jeff West v. J. Greg Allen Building, Inc., and Princeton Homes, and Greg Allen, 41A01-1701-CT-182.

The unanimous appellate panel affirmed the verdict against West, determining the evidence was sufficient to support the breach of fiduciary duty claim and the award of $220,000.

Also, the Court of Appeals affirmed the jury’s finding of defamation, but reversed the award of punitive damages.

Allen, GABI and Princeton Homes argued the defamation could not stand because the jury’s verdict on the breach of fiduciary duty and theft claims established that the letter was true.  

However, the appellate court pointed out the letter accused West of stealing more than $1 million while the jury found that West’s breach caused GABI $220,000 in damages and his theft was $4,000. The amounts are far short of what he was accused of taking.

 “Put another way, the jury could have found that West ‘stole’ $224,000.00 from GABI but that Cross-Appellants defamed him by alleging that he stole far more,” Judge Cale Bradford wrote for the court. “Because the jury’s verdicts are not inconsistent based on logical or legal impossibility, Cross-Appellants have failed to establish that the jury’s verdict that they defamed West must be overturned on that basis.”

Even so, the Court of Appeals reversed the award of punitive damages against Allen. The judges held there was insufficient evidence to sustain a finding that Allen had actual malice when defaming West.

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