Krispy Kreme Faces New Trial Over Allegedly Frivolous Defense in Auto Accident Case

Insurance companies and corporate defendants often try to deny a legitimate personal injury claim. It is one thing to litigate a case in court. But it is quite another when a defendant raises arguments it knows to be frivolous.

For this reason, Georgia law allows successful personal injury plaintiffs to ask for a determination of whether or not the defense “presented a frivolous claim or defense.” This requires the court to hold a “bifurcated” or two-part hearing. In the first part, the “trier of fact,” which is typically a jury in personal injury lawsuits, decides if the challenged defense was in fact frivolous. If the answer is “yes,” then the trier of fact must then assess an appropriate award of damages to the plaintiff, which may include attorney’s fees and litigation expenses.

Showan v. Pressdee

Although personal injury claims are normally a matter of state law, when a Georgia plaintiff sues a non-Georgia defendant, the defense may have the case remanded (transferred) to federal court. The federal court must still apply the substantive law of Georgia in deciding the merits of the lawsuit. However, the trial itself is conducted under the Federal Rules of Civil Procedure, and to the extent that those rules conflict with the rules of Georgia state courts, the federal rules prevail.

In a recent decision, Showan v. Pressdee, the U.S. 11th Circuit Court of Appeals considered whether or not Georgia’s frivolous claim rule applied in cases tried in federal court. The underlying lawsuit involved a rear-end car accident between the plaintiff and the defendant, who was employed by Krispy Kreme. The defendant was acting within the “scope of his employment” at the time of the accident, meaning Krispy Kreme could be held vicariously liable for the plaintiff’s injuries.

In an insurance report prepared shortly after the accident, Krispy Kreme admitted its employee was 100% responsible for the accident. Nevertheless, the company contested the plaintiff’s personal injury lawsuit, alleging she was at least partially at-fault. Then, on the eve of trial, Krispy Kreme reversed position again and admitted it was liable for the accident.

Krispy Kreme also had the case removed from state to federal court. A federal jury awarded the plaintiff $330,000. The trial judge, however, refused to let the jury hear the defendant’s motion for additional compensation based on Krispy Kreme raising a frivolous defense–i.e., its flip-flopping on the question of liability. The judge determined that federal rules overrode the Georgia statute on this question.

The 11th Circuit disagreed. It held that state law creates a “substantive individual right … that does not purport to abrogate any procedural right conferred by the Federal Rules.” This meant that the plaintiff, having won her case on the merits, was entitled to the two-step hearing to decide if Krispy Kreme raised a frivolous defense, and if so, whether she was entitled to additional compensatory damages. The appeals court noted that Georgia law makes it clear the judge is required to hold such a hearing. The trial judge was not entitled to make a unilateral declaration that Krispy Kreme did not raise a frivolous defense, as that was solely a question for the jury to answer.