United States Court of Appeals FOR THE EIGHTH CIRCUIT

___________ No. 96-2268

___________ Charles Parsons, Elizabeth Parsons, * * Appellees, * * v. * * First Investors Corporation, * * Appellant. *

___________ Appeals from the United States No. 96-2290 District Court for the

___________ Western District of Missouri. Charles Parsons, Elizabeth Parsons, * * Appellants, * * v. * * First Investors Corporation, * * Appellee. *

___________ Submitted: January 13, 1997

Filed: August 7, 1997

___________The HONORABLE ANN D. MONTGOMERY, United States District Judge 1 for the District of Minnesota, sitting by designation. -2- Before WOLLMAN and HANSEN, Circuit Judges, and MONTGOMERY, District 1 Judge.

___________ WOLLMAN, Circuit Judge. Charles and Elizabeth Parsons sued First Investors Corpor ation (First Investors), claiming they were fraudulently induced to invest in a junk bond mutual fund managed by First Inv estors. The jury returned a verdict for the Parsons, awarding the m compensat ory and punitive damages. The district court subsequently remitted th e punitiv e damages award and denied First Investors’ motion for a new trial. Firs t Investors appeals, and the Parsons cross-appeal. We affirm.
I.
In the 1980s, First Investors, a securities company having $3 billion in asset s under management and a net worth of $6.9 mil lion, offered a mutual fund that invested in jun k bonds. Charles and Elizabeth Parsons, a retired couple with a net worth o f $80,000 and no i nvesting experience, invested in this fund and lost money as a result. The Parsons sued under Missouri law, alleging that First Inve stors fraudulently induced them to invest in the fund with as surances that the fund was a conservative investment andthat the value of their principal would not fluctuate, something that was not true. The jury awarded the Parsons $26,949.51 in compensatory damages. The issue of punitive damages was submitted separately tothe jury. The Parsons arg ued for a punitive damage award, suggesting several ways the jury might calculate an appropriate amount based on First Investors’ net worth of $6.9 million and asking-3-

for an award of $500,000 or more. During rebuttal argument, counsel for the Parsons made the following statement:
The defend ant teaches people to go into other people’s houses to us e management skills, to use psychological hooks to g et trust. And after they get thi s trust, after they target unsophisticated, inexperienced and elderly people, and they es tablish this trust, they then wrecklessly [sic] disregard those people’s rights. How could it possibly be otherwi se? They have got $3 billion in assets total, and they have got one -- remember Ms. Head -- 1.6 --
Firs t Investors objected and moved for a mistrial, arguing that Parsons’ counsel ha d misled the jury with the $3 billion c omment. After a discussion with counsel, the court stated that “the $3 billion in assets is absolutely improper at this stage. I mean that it leads this jury to believe that $3 billion is something at which they could punish thi s defendant.” The court stated that it would take corrective action because “the only hope to salvage this trial . . . at least to salvag e the punitive damage part,” was to instruct the jury to disregard the comment. The court also stated:
I a m not saying that I am convinced that is going to do the job. But a t least it’s the only thing that can be done, and it’s got to be done quickly, because the longer they are sitting there and stare and think about $ 3 billion, the greater the potential.
The court admonished the jury to disregard the $3 billion reference. The jury the n returned a verdict awarding the Parsons $500,000 in punitive damages.
First Investors s ubsequently moved for a new trial or remittitur, arguing that the $3 billio n comment was unfairly prejudicial. The court noted that at the time i t instr uctedthe jury to disregard the comment, it “was not convinced . . . that th e instruction would cure the unfair prejudice caused” by the $3 billion reference. The-4-

court stated that the inaccurate reference to $3 billion was likely to lead the jury t o believe that it could base its amount of punishment on this figure and that regardless of what the jury believed, $3 billion was such a large amount of money that it carried a “high potential” of prejudice. The court concluded:
Af ter reflecting on the evidence regarding the $3 billion, on the fac t plaintiff’s counsel referred to it in the rebuttal portion of closing argument so that defendant had no opportunity to reply, on the fact that the evidence of de fendant’s net worth was a small fraction of $3 billion, and on m y reaction at th e time to the impact on the jury of the $3 billion reference, I believe that the cautionary instruction did not cure the unfair prejudic e incident to suggesting that defendant has $3 billion in assets. The court concluded that the fairness of the punitive damages proced ure had been “un fairly prejudiced” by the $3 billion reference. To cure this unfairness, the court noted that the punitive damages award could be reversed, but concluded t hat a reduction in the amount of the award “will fully compensate for the ineffectiveness of th e cautionary instruction in erasing the unfair prejudice resulting from counsel’s remark.” The court then reduced the amount of punitive damages to $300,000.
II.
A.
First Investors argues that the district court erred in not submitting specia l instructions to the j ury regarding its statute of limitations defense. After reviewing the instructi ons, we conclude the instructions necessarily required the jury to resolve th e statut e of limitations issue in the Parsons’ favor in order to ultimately find for th e Parsons.-5- B. Both parties challenge the district co urt’s remittitur order. First Investors argues that the court should have ordered a new trial rather than a remittitur. The Parson s contend that no remittitur was necessary.
“The decision to grant remittitur in a diversity action is a procedural matte r governedby federal, rather than state, law.” In re Knickerbocker , 827 F.2d 281, 289 n.6 (8th Cir. 1987); see Browning-Ferris Indus. of Vermont, Inc. v. Kelco Disposal , Inc. , 492 U.S. 257, 278-79 (1989). We review a district court’s decision to orde r remittitur for abuse of discretion, see id. at 279, and we will not reverse its denial of a moti onfor a new trial absent a clear abuse of discretion. See Keenan v. Compute r Assoc. Int’l, Inc. , 13 F.3d 1266, 1269 (8th Cir. 1994); Lockley v. Deere & Co. , 93 3 F.2d 1378, 1385 (8th Cir. 1991).
“We realize that the general rule is that where a punitive damage award is the resu lt of passion and prejudice, a new trial is required and that a remittitur is not a n appropriate remedy,” because of the concern that the liability finding may have been compromised. See Hale v. Firestone Tire & Rubber Co. , 820 F.2d 928, 936 (8th Cir. 1987); 11 Charles Alan Wright, et al., Federal Practice and Procedure § 2815 at 165 (1995). In unique circumstances, however, we have held that a remittitur may be used and that new tr ial is not necessary. See Hale , 820 F.2d at 937 (despite prejudic e caused by counsel’s actions, remittitur better remedy than ordering fourth trial an d s u bjecting parties to additional expenses); Ouachita Nat’l Bank v. Tosco Corp. , 716 F.2d 485 , 488 (8th Cir. 1983) (en banc) (approving district court’s decision to remi t damages award miscalculated because of improper closing argument); Kropp v

. Zieba rth , 601 F.2d 1348, 1354-55 (8th Cir. 1979) (per curiam) (jury improperl y influenced by party’s damage calculation, but bec ause of complexity, large record, and time that had passed since events in question, remittitur was option to new trial) ; Wright, et al., § 2815 at 166 n.14 (although passion may have affected verdict, “an-6-

op portunity to reduce the award as an alternative to a new trial might well be offered . . . wherever the trial judge is satisfied with the justness of the result on the question of lia bility” (quoting McCormick, Damages § 19 (1935)); see also United States v

. 47.14 Acres of Land , 674 F.2d 722, 728 (8th Ci r. 1982) (“The use of a remittitur as an alternative to a new trial is appropriate for complex, lengthy litigation.”).
We conclude that the district court did not abuse its discretion in ordering a remittitur rather than a new trial. First, because the trial was bifurcated, there is no risk tha t the liability and compensatory damages determination was affected by counsel’s remark. Second, a new trial on punitive damages would be unnecessarily costly and complex because it would require re-presentation of much of the evidence from th e liability phase as well

as the punitive damages evidence. Third, we are now ten years remo ved from the events giving rise to this litigation. Finally, we defer to the district court’s determination of the impact of a prejudicial remark during closing arguments and it s assessment of the effectiveness of any curative measures. See Vanskike v

. UnionPacific R. Co. , 725 F.2d 1146, 1149 (8th Cir. 1984) (“`The district court is in a better positio n to determine whether prejudice has resulted from a closing argument and the appellate court w ill not disturb the district court’s ruling unless there has been an abuse of discretion.’” (quoted case omitted)); Ou achita Nat’l Bank , 716 F.2d at 490 n.4 (“Reading the transcript of the closing argument, we might be inclined to agree [that the argument was not prejudicial], but we were not in the courtroom and we are in no position to speculate about the overall effect of that argument. The trial judge was in the best po sition to observe and assess the effects of the final argument.”). Cf

. Lockley , 933 F.2d at 1388-89 (improper reference in closing arguments to $3 billion gross sales not basis for new trial because prejudice from isola ted statement diminished by district court’s instructions and jury was already aware of wealth disparity between parties).-7- C.
First I nvestors argues that the remitted punitive damages award of $300,000 is excessive, both under Missouri law and the Due Process Clause.
“A district court’s determinati on concerning whether a punitive damages award is in accordance with state law is reviewed for abuse of discretion.” Kimzey v. WalMart Stores, Inc. , 107 F.3d 568 , 577 (8th Cir. 1997) (citing Browning-Ferris Indus. of Vermont v. Kelco Disposal, Inc. , 492 U.S. 257, 278-79 (1989), and Gasperini v

. Center for Humanities, Inc. , 116 S. Ct. 2211, 2223-24 & n.18 (1996)). In Missouri, “[p]uniti ve damages ‘are imposed for the purpose of punishment and deterrence.’ ” Rodriguez v. Suzuki Motor Corp. , 936 S.W.2d 104, 110 (Mo. 1996) (en banc) (quoting State ex rel. Smith v. Greene , 494 S.W.2d 55, 60 (Mo. 1973) (en banc)).
Missour i places no set limit on punitive awards, but requires that “when punitive damages are awarded by a jury, both the trial court . . . and the appellate court review the award to ensure that it is not an abuse o f discreti on.” Call v. Heard , 925 S.W.2d 840, 849 (Mo. 1996) (en banc). Se veral factors may be considered, including the degree of malice o r outrageousness of the defendant’s conduct, aggravating and mitigatin g circ umstances, the defendant’s financial status, the character of both pa rties, the injury suffered, the defendant’s standing or intelligence, and the relationship between the two parties. Id. at 849 (citing Moore v

. Missour i-NebraskaExp., Inc. , 892 S.W.2d 696, 714 (Mo. Ct. App

. 1994)). “An abuse of discretion is established when the pu nitive damages award is so disproportionate to the factors relevant to the size of th e award that it reveals ‘improper motives or a clear absence of the honest exercise of judgment.’” Call , 925 S.W.2d at 849 (citation omitted). Kimzey , 107 F.3d at 576. The district court found that the evidence support ing the punitive damages award in this case included evidence of harm to the Parsons and similarly situated investors; evidence that the misrepresentations made to the Parsons were the result of a general company policy of First Investors, and that a misleading sales presentation was used-8-

company-wide to target unsophisticated investors; and evidence that First Investor s trained its representat

ives to gloss-over or conceal the true nature of the risks involved in investing in the junk-bond mutual fund. The distric t court also noted that the Parsons “are an elderly retired couple of good standing in the community, but with limite d education and investment experience. The defendant was experienced in sellin g financial investments.” Further, the court found that t here was evidence from which the jury could have inferred that First Investors knew the representations it made to th e Parsons were misleading and that First Investors “intended to take advantage o f unso phisticated investors.” The court concluded, “[f]raudulent representations which put the life savings of the elderly at risk are reprehensible and deserve punishment. ” Based on thes e findings we conclude that the district court did not abuse its discretion in determining that an award of punitive damages was justified.

We also conclude that the $300,000 award is n ot so “grossly excessive” in relation to Missouri’s interes ts that it has entered into the “zone of arbitrariness” that violates the Due Process Clause. See BMW of North America, Inc. v. Gore , 116 S. Ct. 1589, 1595 (1996). Analyzing the award under the first of t he three guideposts defined by the Supreme Court in BMW --“thedegree of reprehensibility of the defendant’s conduct,” id. at 1599--we find to be highly reprehensible First Investors’ scheme of misleading unsophisticated investors such as the Parsons, who put a substantial portion of their life savings at risk, about the dangers of investing in the

junk-bond fund. See id. (“infliction of economic injury, especially when done intentionally through affirmative acts of misconduct, or when the target is financially vulner able, can warrant a substantial penalty” (citation omitted)). Turning to the secon d guidepost--the ratio between the punitive da mage award and the actual harm inflicted on the plaintiff, id. at 1601--the ratio of punitive damages to actual damages in this case is 11.13 to 1. W e conclude that this ratio evinces a “reasonable relationship” between actual an d punitive dam ages given the nature of First Investors’ conduct. See id. at 1601; Pulla v

. Amoco Oil Co. , 72 F.3d 648, 660-61 (8th Cir. 1995) (must be “some proportion” and a “reasonable relationship” between punitive and actual damages).First Investors argues that the jury instructions allowed the jury to punish First 2 Invest ors on the basis of its conduct towards investors in states other than Missouri

. Such evide nce is, however, “relevant to the determination of the degree o f reprehensi bility of the defendant’s conduct.” BMW , 116 S. Ct. at 1598 n.21

. Alt hough the instructions did not prevent the jury from considering First Investors ’ conduct outside Missouri, First Investors’ concerns are belied by the record. N o evidenc e was introduced at the punitive damages phase regarding First Investors ’ con duct towards investors outside Missouri, nor did the Parsons argue that the jur y should consider First

Investors’ conduct in other states. Accordingly, any error in the instructions was harmless. First Investors’ motion to strike mater ials the Parsons filed on appeal is denied. 3 -9- Both the Su preme Court and our court have previously approved ratios of 10 to 1. Se e BMW , 116 S. Ct. at 1602 & n.34 (citing TXO Prod. Corp. v. Al liance Resources Corp. , 509 U.S. 443, 462 (1993)); Kimzey , 107 F.3d at 578 & n.4. Because First Investors does no t argue that the punitive damages award is inconsistent with comparable civil or crimina l sanctions that could be imposed for its conduct, we need not review the award in the light of this the third of BMW ’s guideposts. BMW , 116 S. Ct. at 1603. 2 The judgment is affirmed. 3 A true copy.
Attest: CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT.