Opinion ID: 3032603
Heading Depth: 1
Heading Rank: 2

Heading: analysis

Text: [3] Evidence supporting the verdict. Irvin continues to argue that he is entitled to JNOV because Southern Union failed to show that his efforts caused SWG to reject its offer. He cites the testimony of a pair of SWG officers who had doubts about Southern Union’s offer, but each of these witnesses tied their doubts to difficulties the regulators might raise. Some members of SWG’s board did not think Irvin’s interventions significant. Others did. That adverse inferences could be drawn against Rose has already been observed. Some of the strongest evidence from which the jury could draw inferences was the value ONEOK placed on Rose’s services and relationship with Irvin as well as Rose’s own high evaluation of his help after the April 5, 1999, meeting of the SWG board. Enough evidence was presented to the jury for it to find that Irvin caused at least 40% of the harm to Southern Union by interfering with its contractual relations; his interference was a significant cause. Caudle v. Bristow Optical Co., 224 F.3d 1014, 1023-24 (9th Cir. 2000) (as amended) (citing Wagenseller v. Scottsdale Mem’l Hosp., 710 P.2d 1025, 1041 (Ariz. 1985). [4] Irvin’s scope of authority defense. Under Arizona law, a statute regulates claims against public employees such as Irvin. Ariz. Rev. Stat. § 12-821.01(A). It applies if the suit is SOUTHERN UNION CO. v. IRVIN 8157 against the employee in his public capacity and is directed to cases making claims against the employee’s public employer. Id. [5] Irvin has found a decision of an intermediate Arizona court that he contends fits his case: [I]t is unnecessary for the claimant to sue the employer or file a notice of claim against either the individual public employee or the employer. Instead, in such a case the issue of whether the defendant was acting within the course and scope of his employ- ment remains to be decided by the trier of fact, and a plaintiff who fails to file a notice of claim does so at his own risk. The parties have not reached the point in the proceeding at which it is appropriate to raise and decide the question whether the acts were done in the scope of Crum’s employment, but it is clear that it cannot be resolved on a motion to dis- miss. In any event, if the plaintiff does not file a notice, and the finder of fact concludes that the defendant was acting within the course and scope of his employment, the plaintiff cannot have judgment against the defendant. Crum v. Super. Ct., 922 P.2d 316, 318 (Ariz. Ct. App. 1996). [6] majority of this court holds that, under the rule stated in Crum, Irvin was entitled to have the jury consider his defense that his actions were within the scope of his duties as a member of the ACC. Despite this holding, a different majority concludes that the instructional error was harmless. Assessing punitive damages of $60 million against him, the jury provided “a strong indication” that it disbelieved Irvin’s account of what he was up to. Larez v. Holcomb, 16 F.3d 1513, 1518 (9th Cir. 1994). Southern Union’s view of the facts, accepted by the jury, was that Irvin’s acts were connected with his official duties only as much as a judge accept- 8158 SOUTHERN UNION CO. v. IRVIN ing a bribe to decide a case in favor of the briber would be engaging in conduct connected to his duty as a judge. Large punitives are “evidence that an erroneous jury instruction was harmless.” See Swinton v. Potomac Corp., 270 F.3d 794, 806 (9th Cir. 2001), cert. denied, 535 U.S. 1018 (2002). In short, the award here “makes it quite plain” that the jury would have come to the same conclusion even if the Crum instruction had been given. Lambert v. Ackerley, 180 F.3d 997, 1009-10 (9th Cir. 1999) (en banc), cert. denied, 528 U.S. 1116 (2000). [7] The punitive damages. Sixty million dollars in punitives after an award of compensatory damages against Irvin of $390,072! The ratio of over 153 to 1 immediately commands our attention. It cannot survive the constitutional scrutiny required by the Supreme Court. State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408 (2003). [8] No bright line has been set beyond which punitives may not go. Id. at 425. But we have been reminded that, under established principles, few awards exceeding a single digit ratio to a significant degree “will satisfy due process.” Id. Even an award more than four times the amount of compensatory damages “might be close to the line of constitutional impropriety.” Id. History points to double, triple, or quadruple punitives; these ratios “are instructive.” Id. In the light of these admonitions and suggested boundaries, we review the jury award and the judge’s ruling sustaining it. [9] “ ‘The most important indicium of the reasonableness of a punitive damages award is the degree of reprehensibility of the defendant’s conduct.’ ” Id. at 419 (quoting BMW of North America, Inc. v. Gore, 517 U.S. 559, 575 (1996)). Briefed on Campbell, the district court properly looked first at this factor. The court found Irvin’s conduct to be “marked by two factors: repeated actions and harm caused by intentional trickery and deceit.” Irvin, the court stated, had abused his powers as a commissioner “in favor of the private interests of a specific utility company, ONEOK, and his personal interSOUTHERN UNION CO. v. IRVIN 8159 ests . . . .” Harm to Southern Union was inflicted by Irvin by his letter and his telephone call to the April 5, 1999 board meeting of SWG and by his instigation of Governor Guinn’s call. This actual harm was the culmination of two months of planning and activity directed to blocking the proposed Southern Union merger. Irvin’s purposeful persistence in this effort, the district court found, was matched by his efforts at concealment. As far as possible, his activities to block the merger were kept from his fellow commissioners, and, the court added, “afterwards he covered up his wrongdoing to ensure the outcome of the scheme.” When Southern Union challenged him and began litigation, Irvin’s effort at concealment continued: “he persevered in hiding his wrongful acts throughout the trial and in particular while testifying in Court before the jury.” The court marked as “particularly egregious” Irvin’s manufacture of evidence — the fabricated notes of his wife’s telephone conversation with Rose, which Irvin persuaded his counsel (paid for him by the state of Arizona) to present as genuine to the court. The court found this “intentional fabrication of evidence” by Irvin to show his consciousness of guilt and to go to the reprehensibility of his conduct. The district court noted that neither Campbell nor Gore considered reprehensible conduct by a public official. The court noted that significant consideration must be given to the nature of the public trust embodied in the public office the official held. The court noted the broad power of the ACC, which the Supreme Court of Arizona said was “treated as a fourth branch of government in Arizona.” Polaris Int’l Metals Corp. v. ACC, 652 P.2d 1023, 1029 (Ariz. 1982). The court turned to the award of punitives in civil rights cases under 42 U.S.C. §§ 1981 and 1983 where the ratio of punitives to actual damages far exceeded a single digit ratio. 8160 SOUTHERN UNION CO. v. IRVIN Indeed nominal damages had been held sufficient to support the award of punitives against a public officer. Gill v. Manuel, 488 F.2d 799, 802 (9th Cir. 1973). In holding that municipalities are exempt from punitives in civil rights cases, the Supreme Court noted that effective deterrence was achieved by the assessment of punitives against the offending official. City of Newport v. Fact Concerts, Inc., 453 U.S. 247, 269-70 (1981). The district court held that the single digit ratio was not the right measure from harm by a public official abusing his trust. [10] The district court was right in seeing reprehensible conduct by a public official as presenting an issue not addressed by Gore and Campbell. It was, however, we believe, mistaken in using awards in civil rights causes as a bench mark. The redress of racial, religious or gender discrimination has been treated as a special area of public concern where affront to human rights may require high punitives. Zhang v. American Gem Seafoods, Inc., 339 F.3d 1020, 1043 (9th Cir. 2003), cert. denied, 541 U.S. 902 (2004). We do not believe that the civil rights case ratios apply to a case brought as a private tort action. [11] We do not mean to minimize the magnitude of Irvin’s exploitation of his office. The jury was entitled to consider how he worked hand in glove with Rose and what this cooperation meant in securing for Rose 66-2/3% of the underwriting management fee up to $3 million and 80% of the fee beyond $3 million. That no payoff could be shown was because the grateful underwriter withdrew as this litigation went on. Nothing in Irvin’s extraordinary efforts suggests that he was motivated only by a selfless desire to enrich Rose. [12] The failed plan to introduce fabricated evidence also did not bring a profit to Irvin, nor, since it failed, did it do any economic harm. Nonetheless, this shady strategy could appropriately enter the jury’s calculation. See United States v. Perkins, 937 F.2d 1397, 1401-2 (9th Cir. 1991). In addition, Irvin SOUTHERN UNION CO. v. IRVIN 8161 was observed at his ACC office destroying documents subpoenaed by the plaintiff, and his secretary had her hard drive reformatted. In court, Irvin repeatedly denied evidence of his misconduct, to the extent that the district court found his testimony to be part of his reprehensible conduct. As his document destruction was incomplete and as his words under oath did not convince the jury, no economic harm was done by them. They were grave injuries to the judicial process. [13] To sum up our view of the punitives, the ratio to actual damages is too high. The noneconomic damage to the judicial process and the exploitation of high public office were properly taken into account. We vacate the award, remanding for the district court to offer the option of a remittitur or a new trial on the punitives. We leave to the discretion of the district court the ratio to be set if it orders remittitur. [14] Southern Union’s appeal. The district court found that Southern Union offered “insufficient evidence to establish the terms of a consummated merger with Southwest.” Although Southern Union points to evidence to the contrary, we are unwilling to reverse the well-informed trial judge on this close question, especially as a new trial on the alleged lost profits would, at most, lead to the award of damages not likely to be collected. [15] Conclusion. The award of punitive damages is vacated and this issue is remanded to the district court with instruction to order a remittitur or a new trial on this issue. The judgment against Irvin for compensatory damages is affirmed. Southern Union’s cross-appeal is denied. 03-16649—Affirmed in part, vacated in part, and remanded. 03-16729—Affirmed. 8162 SOUTHERN UNION CO. v. IRVIN