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Rhode Island Resource Recovery Corp. v. Restivo Monacelli, LLP

Superior Court of Rhode Island

January 11, 2016

RHODE ISLAND RESOURCE RECOVERY CORPORATION
v.
RESTIVO MONACELLI, LLP

Providence County Superior Court

For Plaintiff: Thomas F. Holt, Esq. Joseph J. Rodio, Esq. Christopher J. Valente, Esq.

For Defendant: Robert C. Shindell, Esq. Derek M. Gillis, Esq. Stephen Adams, Esq.

DECISION

SILVERSTEIN, J., JUSTICE/MAGISTRATE

The Rhode Island Resource Recovery Corporation (RIRRC) is a quasi-public entity through which the State of Rhode Island operates the Central Landfill in Johnston, Rhode Island. See G.L. 1956 § 23-19-2. Restivo Monacelli, LLP (Restivo) is a certified public accounting and business advising firm duly organized and existing under the laws of the State of Rhode Island.

I

Facts and Travel

On May 3, 2006, RIRRC issued an Invitation for Bids for Accounting and Auditing Services. Following a review of the submissions, Restivo was awarded the contract and entered into an agreement (the Agreement) with RIRRC. Under the terms of the Agreement, Restivo was to provide accounting and auditing services for the term of August 1, 2006 through June 30, 2009, inclusive of fiscal years 2006 and 2007.[1]

From August 1, 2006 until such time as the Agreement terminated, Restivo (1) audited RIRRC's financial statements and prepared reports for RIRRC concerning the fiscal years ending June 30, 2006 and June 30, 2007; (2) conducted semiannual reviews and prepared reports for RIRRC for the six months ending December 31, 2006 and December 31, 2007; (3) audited financial statements and prepared reports for RIRRC in connection with RIRRC's Money Purchase Pension Plan for the years ending December 31, 2006 and December 31, 2007; and (4) provided advice and direction to RIRRC's Board of Commissioners and other RIRRC managers and employees with respect to RIRRC's finances, fund and asset management, and other business-related matters.

On March 13, 2008, after conducting a preliminary forty-five day investigation, the Bureau of Audits (the Bureau) released a Summary of Findings which revealed evidence of corruption, mismanagement, and other wrongdoing at RIRRC.[2] On September 22, 2009, the Bureau issued an audit report (the Audit Report) highlighting numerous violations, breaches, and wrongful acts that involved RIRRC and occurred while Restivo was providing RIRRC with accounting and auditing services. On July 30, 2010, RIRRC filed a Complaint in this Court, alleging that Restivo had breached professional and contractual duties it owed to RIRRC in the following manner: (1) Restivo failed to report alleged inaccuracies or discrepancies in financial statements; (2) Restivo failed to properly perform audits and other financial services in accordance with generally accepted auditing and/or accounting principles and standards; (3) Restivo failed to provide a true portrayal of RIRRC's financial position during the relevant time periods; and (4) Restivo failed to notify State authorities after becoming aware of the alleged inappropriate and unlawful acts highlighted in the audit report. The Complaint further alleged that "[i]n the course of conducting each audit or review, and in the course of providing accounting advice, Restivo was bound by the accounting principles generally accepted in the United States (GAAP), [as well as] the generally accepted auditing standards (GAAS) established by the American Institute of Certified Public Accountants." Compl. ¶ 13. Restivo did not deny that it was bound by such principles, Answer at ¶ 13, but did deny that it breached its professional and contractual duties to RIRRC, id. at ¶ 18; see also R.I. Res. Recovery Corp. v. Restivo Monacelli, LLP, No. PB 10-4502 at 14 (R.I. Super. Feb. 23, 2015 (Silverstein, J.)) ("as RIRRC and Restivo both seem to agree, the current industry standards for auditors include GAAS and GAAP, as well as the Government Auditing Standards (also referred to as the Yellow Book) . . . What the parties seem to disagree upon, however, is what exactly is required under a 'Yellow Book audit'").

The parties proceeded to trial, at the end of which the jury found Restivo liable for a) $2, 551, 052 in losses related to RIRRC's trust fund investments; b) $83, 500 in costs incurred by RIRRC under the breached Agreement; c) more than $207, 000 in damages stemming from inappropriate charitable contributions made by RIRRC between August 1, 2006 and June 30, 2008; and d) $20, 500 in harms sustained by RIRRC when it was forced to hire a replacement provider of accounting and auditing services.

Currently before the Court are three post-trial motions filed by Restivo: a Motion for Setoffs of Joint Tortfeasor Settlements and Insurance Payments, a renewed Motion for Judgment as a Matter of Law, and a Motion for New Trial. This Decision will assess the merits of each motion in turn, beginning with the Motion for Setoffs of Joint Tortfeasor Settlements and Insurance Payments (Motion for Setoffs).

II

Motion for Setoffs of Joint Tortfeasor Settlements and Insurance Payments

Argument Summary

Restivo asks this Court to reduce the amount of the jury's verdict on the grounds that RIRRC previously settled other cases in which the damages sought were identical to those awarded here. Specifically, Restivo contends that RIRRC received payments under settlement agreements with Van Liew Trust Company (Van Liew) and Lefkowitz, Garfinkel, Champi and Derienzo (LGC&D), both of which were joint tortfeasors with Restivo. Defendant's Mot. for Setoffs at 2-3. Because "[a] release by the injured person of one joint tortfeasor . . . reduces the claim against the other tortfeasors in the amount of the consideration paid for the release, " id. at 2, Restivo requests that the jury's verdict be reduced by the amount of the settlements against Van Liew and LGC&D. Restivo also contends that the settlement payments made by RSUI Indemnity Company (RSUI) and Travelers Casualty and Surety Company of America (Travelers) "are for effectively the same damages as RIRRC has alleged against Restivo, " id. at 5, and that Restivo is entitled to a setoff for the amounts recovered by RIRRC from RSUI and Travelers, id. at 3-5. Restivo asserts that a denial of its Motion for Setoffs "would not only be contrary to the unequivocal language of § 10-6-7, but it would frustrate the rationale underlying the statute, " which is to proscribe "double recovery" even where a breach of contract claim is raised. Defendant's Supplemental Mem. Regarding Applicability of Joint Tortfeasor Setoff at 5. In support of this contention, Restivo cites to Augustine v. Langlais, 121 R.I. 802, 804-05, 402 A.2d 1187, 1189 (1979), where our Supreme Court stated that "[t]he cases that have considered statutes identical to § 10-6-7 universally hold that amounts paid by settling defendants must be credited to the verdict amount returned against nonsettling joint tortfeasors."

In response, RIRRC contends that neither Van Liew nor LGC&D are joint tortfeasors with respect to Restivo, Plaintiff's Mem. of Law in Supp. of its Obj. to Defendant's Mot. for Setoffs at 8-12, and that the collateral source rule "bars settlements from a plaintiff's insurer from being held against plaintiff at setoff, "[3] id. at 12-14. Furthermore, RIRRC asserts that Restivo has failed to show what parts of the prior settlements are attributable to the award it seeks to offset. Id. at 6. Finally, RIRRC contends that any damages stemming from a non-tort claim would not be eligible for setoff, and that the Court must therefore deny the Motion, at least insofar as it relates to RIRRC's breach of contract claims. Id. at 8.

Standard of Review

Under G.L. 1956 § 10-6-7, "[a] release by the injured person of one joint tortfeasor, whether before or after judgment . . . reduces the claim against the other tortfeasors in the amount of the consideration paid for the release . . . ." Thus, a Court faced with a motion for setoff of joint tortfeasor settlements must determine whether the moving party has the status of a joint tortfeasor, and whether that status is shared by another tortfeasor who has been released by the injured person. In order for two parties to be considered joint tortfeasors, they must both be liable in tort, and they must have engaged in common wrongs resulting in the same injury. Wilson v. Krasnoff, 560 A.2d 335, 339 (R.I. 1989).[4]

Analysis

Each settlement agreement reached by RIRRC with Van Liew, LGC&D, RSUI, and Travelers (the settling parties) states that upon receipt of payment, RIRRC "fully and completely releases" the settling parties "of and from any and all actions, suits, claims, duties, causes of action, demands, obligations, liabilities, rights, damages (including punitive or exemplary damages), or liability of any nature whatsoever." See, e.g., Defendant's Ex. DD at 2. Additionally, each agreement states that it "is intended to be a compromise among the Parties" and is not an admission of liability or coverage. See, e.g., id. at 3. Thus, it is unclear based on the settlement agreements reached with the settling parties not only what wrongs they may be said to have engaged in, but also whether these wrongs are the same wrongs as those engaged in by Restivo. Furthermore, it is unclear to what extent Restivo's liability should be offset by previous payments related to such wrongs, given that (a) no portion of the ...


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