CINCINNATI - A federal appeals court has upheld a $584 million judgment against the heirs of Griffin Industries, calling the actions of Dennis and John M. “Griffy” Griffin “a classic case of improper self dealing.”
The case involves a decades-old dispute between seven of the 12 children of John L. Griffin, who founded the company in 1943 by borrowing $200 to collect animal carcasses from local roads. In the six decades that followed, Griffin Industries developed dozens of ways to convert animal parts and waste products into poultry meal and biodiesel fuel.
Darling International Inc. bought Griffin Industries for $840 million in 2010. The deal led to disclosures about stock and real estate transfers that caused four Griffin sisters – Elizabeth “Betsy” Osborn, Linda Holt, Judith Prewitt and Cynthia Roeder - to sue three of their brothers in 2011.
The sisters alleged Dennis, Robert and Griffy conspired over decades to deprive them of their family inheritance. Robert was dismissed as a defendant, but the sisters continued to pursue claims that their brothers lied to them about company transactions and concealed details of a 1993 court settlement in which Betsy Osborn won a damage award from her brothers.
Because the plaintiffs signed that settlement agreement, the senior judge on the Sixth Circuit Court of Appeals concluded that the Griffin sisters had no claim.
“The parties here were adversaries in court, not fiduciaries,” Judge Gilbert Merritt wrote in his dissenting opinion. “The fact that 25 years later the corporation is worth hundreds of millions of dollars more in the marketplace is not a valid basis for setting aside an agreed-upon and judicially approved settlement agreement many years later.”
But in the majority opinion, Judges Alice Batchelder and Eric Clay ruled the brothers had a fiduciary duty to their sisters that invalidated the settlement terms for three of the Griffin sisters.
“The ‘sisters,’ plural, did not sue Defendants in 1993—Betsy did, and her settlement with Defendants unquestionably prevents her from recovering any additional sums related to Defendants’ illicit stock transactions Linda, Cyndi, and Judy, by contrast, were only nominal parties to the lawsuit because Betsy brought a derivative claim on behalf of all Griffin Industries shareholders. The district court found that these sisters did not discover the nature of Betsy’s lawsuit until 2010 because Defendants hid and lied about Betsy’s claims, and that Defendants browbeat them into signing a settlement agreement that they had not read and did not understand.”
Judge Merritt also said the judgment – which included 30 years of interest worth about $250 million - was “excessive, unreasonable and probably in violation of due process.” But in the majority opinion, Judges Batchelder and Clay wrote that Judge Bertelsman “gave thoughtful consideration to the unique equities of this case in formulating” the interest award, adding in a footnote:
“We have uncovered no Kentucky authority suggesting that tortfeasors may use wrongfully acquired profits interest-free if they can hide their wrongdoing for many years before suit is brought.”