$27.5 Million Settlement in Sexual Abuse Case

After a thirteen-year-old girl was sexually abused in an Atlanta-area hotel, her family contacted Butler Kahn for help.  We took the case.  We worked for the victim and her family for almost five years.

Before our firm took the case to trial, the defendant’s highest settlement offer was $2 million.  After a jury trial, an appeal, and three mediations, we won a settlement for our client of $27.5 million.

Facts of the Sexual Abuse Case

When Sara Smith* was thirteen, her family moved to Georgia from out of state and lived for a short time at the Willpoint Inn* as they searched for a permanent home.  The Willpoint Inn looked like a perfectly safe place for a family to stay.  What the Smiths couldn’t know was that about a month before they moved in, the management company that operated the Willpoint had hired a dangerous housekeeper.

The management company, Patchwood Management*, would later testify in court proceedings that its policy was to run background checks on every employee that it hired.  But for some reason that was never really explained, Patchwood hired Eric Wolton* with little investigation at all.  Despite multiple gaps in his resume, Patchwood never ran a background check on Wolton.  Patchwood didn’t even Google him.  But they hired him as a housekeeper and gave him a keycard that opened every room in the hotel.

It was a big mistake.  The background check that our firm later ran showed that Wolton had been previously convicted or arrested for pimping, statutory rape, theft by taking, criminal trespass, simple battery, family violence battery, and multiple probation revocations.  In fact, the gaps in Wolton’s resume coincided with the periods when Wolton had been incarcerated.  And as a result of Wolton’s conviction for pimping, a court in a nearby county had ordered Wolton to not to enter any “hotels, motels, inns, [or] extended stays within Gwinnett County.”  And yet, Patchwood hired Wolton to work as a housekeeper with access to every room in the hotel.

In addition to the background check, Butler Kahn also ran a simple search for Wolton on the internet.  Our firm’s Google search turned up his social media profiles.  The pictures and captions that Wolton had posted did not show someone you’d want working in a hotel.  Over and over, the pictures showed Wolton with guns, drugs, and wads of cash.  The captions referred to life as a gang member.  One picture showed Wolton holding a pistol with the caption “ape gang shit.”

From the title of this article, you know what happened next.  Wolton sexually assaulted and abused thirteen-year-old Sara.  He eventually pled guilty to statutory rape, child molestation, aggravated child molestation, and enticing a child for indecent purposes.

Through Butler Kahn, the Smith family sued Patchwood Management for negligent hiring and negligent supervision.  We argued that Patchwood should have run a background check, or at least a Google search, on Wolton before hiring him and giving him keycard access to guests’ rooms.  We also argued that after it hired Wolton, Patchwood should have supervised him better so he could not sneak into empty rooms with an underage girl.

Hotel Management Insurance Policies

Butler Kahn believed this was a big case, so we sought information about every insurance policy that Patchwood Management had.  It turned out that Patchwood had three relevant policies.  Patchwood had a policy with Insurer 1 that provided $1 million in coverage, a policy with Insurer 2 that provided $10 million in coverage, and a policy with Insurer 3 that provided $5 million in coverage.

So the total insurance amount was $16 million.  That was important, because Patchwood Management did not have much in the way of cash or assets to pursue.

Policy-Limit Demands

It took about two and half years from the time we filed the case until we could get to trial.  During the litigation, Defendant Patchwood Management repeatedly asked for delays and extensions of time.  Butler Kahn repeatedly opposed those requests so that we could move the case along quickly.

The judge was patient and wanted to make sure all parties had enough time to prepare for trial, so she granted several extensions at Patchwood’s request.  That is not unusual – most judges will grant one or two extensions if one of the parties asks for them.  But eventually, the judge grew weary of the repeated delays and set a trial date.

During the two and a half years leading up to trial, our firm made several offers to settle the case for the insurance limits of $16 million.  All told, from the time we took the case until the verdict, we made five offers to settle the case for the policy limits.

In response to those offers, Insurer 1 repeatedly offered to pay its $1 million.  But Insurer 2 never offered to pay its $10 million.  Insurer 3 never offered to pay its $5 million, arguing that it did not have to pay its $5 million limits unless and until Insurer 2 had paid its $10 million.

The highest offer that Patchwood or its insurers made before trial was $2 million.  Acting through Butler Kahn, our client turned it down.

Trial of the Sexual Assault Case

We went to trial before a jury.  Because Sara was a minor, our firm hired a conservator to protect her interests and to be with her during the trial.  We retained Hillary Cranford, who has an excellent reputation in Georgia, to serve in that role.  She did a great job.

Incredibly to us, Patchwood denied that it was liable for negligent hiring.  We never understood that – it seemed clear to us that hiring a sex criminal to work in a hotel because you didn’t run a background check or a Google search was negligent.  Patchwood also denied that it was responsible for negligent supervision, arguing that it could not have reasonably prevented Wolton from sneaking into empty hotel rooms with an underage guest.

We did not believe Patchwood Management’s arguments, and the jury did not believe them either.  After a seven-day trial, the jury found that Patchwood was liable.  The jury returned a verdict of $29.4 million in favor of our client and against Patchwood.

Post-Trial Motions and Attorneys’ Fees under O.C.G.A. § 9-11-68

After the trial, we asked the court to make Patchwood pay for our client’s legal fees because Patchwood (through its insurers) had refused to pay our reasonable settlement offers.  We filed this motion under O.C.G.A. § 9-11-68, which says that if a plaintiff makes an offer pursuant to that code section (which our firm had done) the defendant doesn’t pay it, and the plaintiff later obtains a judgment of more than 125% of the amount of that offer, then the defendant has to pay the plaintiff’s attorneys’ fees.  That code section is sometimes called the Offer of Settlement Statute.

Here, we had made a pretrial offer to settle for $16 million.  Because the jury returned a verdict of $29.4 million and the court entered judgment on that verdict, and because $29.4 million is more than 125% of $16 million, we won the motion.  The court ordered Patchwood to pay our client’s attorneys’ fees, which increased the size of our judgment.

The defense filed motion after motion.  Patchwood Management opposed our motion for entry of judgment, fought our motion under O.C.G.A. § 9-11-68, asked for a new trial, and moved for reconsideration.  After mountains of briefing and multiple hearings, the court denied Patchwood’s post-trial motions.

Appeal of the Sexual Abuse Verdict

By the time the court had denied all of Patchwood’s motions, approximately four years had passed since we filed the case.  Patchwood and its insurers still didn’t pay.  Instead, Patchwood appealed.

Patchwood raised a long list of alleged errors in the trial.  They claimed that the trial court had made errors in jury selection, in allowing the jury to see the background check that our firm had run, in allowing certain witnesses to testify, and in awarding fees under § 9-11-68.  Because Patchwood made arguments under the Georgia constitution, the appeal went directly to the Georgia Supreme Court.

Butler Kahn brought in an appellate specialist to help fight the appeal.  We brought in longtime friend of the firm Naveen Ramachandrappa, one of Georgia’s finest appellate lawyers.  Naveen handled the briefing and when the time came to argue the case before the Georgia Supreme Court, he handled the argument.

He did a great job, as always.  After that argument before the Georgia Supreme Court, Patchwood’s insurers asked for another mediation.  We were skeptical – we had already mediated the case twice, and on neither occasion had Patchwood’s insurers seemed serious about settling the case.  But our client wanted to try again.

Settlement above Insurance Limits

To get the case resolved, we needed to reach a settlement with the insurance companies because Patchwood Management did not have significant cash or assets.  But insurers almost never pay above their policy limits.  That was a problem here, because the insurance limits were $16 million and our judgment was for far more than that.

But we had leverage.  On five occasions before the verdict, Butler Kahn had offered to settle the case for $16 million.  Over and over, Insurer 1 had offered to pay its $1 million, but Insurer 2 had never offered to pay its $10 million and Insurer 3 had never offered to pay its $5 million.

Our firm argued that the refusal of Insurers 2 and 3 to pay their limits had led to this above-limits judgment.  We argued that Insurers 2 and 3 should have paid their limits when we offered to settle for $16 million, and that if they had done that, then we never would have taken the case to trial.  So, we argued, Patchwood Management now faced a huge excess judgment as a result of the negligent refusal of Insurer 2 and Insurer 3 to pay their limits.

This is an area in which Butler Kahn has expertise.  Because our firm works our cases hard and we are not afraid to go to trial, this wasn’t the first time we’d had a judgment that exceeded the policy limits.  We understood our leverage and we knew how to use it.

As we headed into our third mediation, this time with mediator Nigel Wright, we knew what arguments to make – and we knew we were right.

Settlement of $27.5 Million

Our third mediation was tough.  When it started, we did not think that Insurer 2 or Insurer 3 would be willing to pay enough to settle the case.

But mediator Nigel Wright worked hard and long.  Eventually, he decided to propose a “mediator’s number.”  That means that Wright proposed a number separately to each side.  If either side declines that number, then the case does not settle.  But if both sides accept the number, then the case settles at that amount.

Wright’s proposed number was $27.5 million.  After nearly five years of litigation, our client was ready for the case to end.  Instead of waiting for the Georgia Supreme Court to issue its opinion or holding out for more, she accepted the number.  And after our firm’s persistent (and correct) arguments that Insurers 2 and 3 were liable above their limits, the insurers also accepted the mediator’s number.

So the case settled for $27.5 million.  No amount of money can undo the harm that Sara suffered as a result of Patchwood Management’s negligence, but she is young and she has a lot of life before her.  With this settlement, she can close this chapter of her life and pursue all of the opportunities that her life affords.

*To protect our client’s confidentiality, this article uses pseudonyms for our client, her family, the hotel, the assailant, and the management company.  Those names that appear on this page are not real.

Jeb ButlerState Bar: #116955

Jeb Butler’s career as a Georgia trial lawyer has led to a $150 million verdict in a product liability case against Chrysler for a dangerous vehicle design that caused the death of a child, a $45 million settlement for a young man who permanently lost the ability to walk and talk, a $3,973,260 settlement after a boating accident, and a $1,250,000 settlement in a pedestrian case, and numerous other verdicts and settlements, many of which are confidential at the defendant’s insistence. Jeb has worked on several cases that led to systemic changes and improvements in public safety. He has been repeatedly recognized as a Georgia SuperLawyer and ranks among Georgia’s legal elite. Jeb graduated in the top 10% of his class at UGA Law, argued on the National Moot Court team, and published in the Law Review. He is the founding partner of Butler Kahn law firm. Connect with me on LinkedIn