Court Opinion

ID: 9538840
Source: CourtListenerOpinion
Date Created: 2023-08-07 07:42:21.883346+00
Date Added: 2024-06-11T14:58:11.591691
License: Public Domain

NOYES, Judge,
concurring in part, dissenting in part.
I concur in the decision to affirm the compensatory damages offset; in all other regards, I respectftilly dissent. In my opinion, the $3 million punitive damages penalty imposed on Winston & Strawn is both unconstitutional and unsupported by the evidence.
A. Punitive Damages Offset: I would reverse the punitive damages award. But if affirming, I would also affirm the punitive damages offset, for reasons explained by the trial court:
There is no evidence upon which punitive damages could be independently assessed against Winston & Strawn for any conduct separate and apart from the conduct of Greenfield. In this Court’s view by agreeing to accept $1 million in punitive damages from Greenfield, the Plaintiff is also *142required to credit that $1 million against the punitive damage award against Winston & Strawn. To allow recovery of the full $8 million would be allowing a double recovery of one-third of the punitive damages assessed because of Greenfield’s conduct. The settlement effects a partial satisfaction of the punitive damages as well.
The reversal of the punitive damages offset gives HRP what the trial court regarded as a $1 million double recovery, and it penalizes Winston & Strawn $1 million more than the trial court had in mind when it denied the motion for remittitur. In light of these circumstances, I think it appropriate for counsel to request that the trial court reconsider the motion for remittitur.
B. Vicarious Liability: I agree that Arizona case law allows punitive damages for respondeat superior liability. I second the concerns expressed by the trial court regarding that law:
While this Court has substantial doubts as to whether the purposes behind the award of punitive damages are served by the application of respondeat superior, particularly when the party whose conduct is the basis for the award of punitive damages is an experienced lawyer whose conduct is not subject to the same kind of supervision and close scrutiny as the conduct of many other types of employees, this Court is bound by appellate authority on this issue.
Winston & Strawn’s argument that Arizona law should evolve to a position more in line with Restatement (Second) of Torts Section 909 (1979) is serious. What happened in this trial and appeal to Winston & Strawn is reason enough to reconsider Arizona law regarding vicarious liability for punitive damages.
If Greenfield was a “managerial agent” of Winston & Strawn, the partnership would be vicariously liable in punitive damages for his evil-minded conduct, even under Section 909. Whether Greenfield was a managerial agent, however, was never litigated; it was mooted by the trial court’s directed verdict on vicarious liability. But the issue appears triable, if Section 909 becomes the law in Arizona.
C. Evidence: Assuming that the law allows punitive damages against Winston & Strawn here, the evidence does not support a $3 million penalty.
1. The damage was done before March 1, 1981: The trial court instructed the jury, “In deciding about punitive damages, you may only consider the actions of Mr. Greenfield that took place after he joined Winston & Strawn on March 1, 1981.” (Although the start-date for compensatory damages was July 1, 1978, none of the parties complain about a March 1,1981 start-date for punitive damages, so there is no issue on appeal about the correctness of that date.)
I submit that the record compels the conclusion that the evil-minded conduct of Greenfield had done its damage to HRP pri- or to March 1, 1981. True, Greenfield earned attorneys’ fees after March 1, 1981, and can be faulted for certain behaviors after that date—such as the untimely and insensitive way in which he disclosed the Special Master’s decision to HRP. But the real damage to HRP was done when the Special Master announced his liability verdict on December 8, 1980—three months before Greenfield joined Winston & Strawn.
The underlying lawsuit against HRP and Chanen was complex only in regard to damages, Liability toned on the testimony of one Chanen employee and one Form-Eze employee, and the question whether Chanen threw Form-Eze off the job on November 19,1974. Trial was in March 1980—one year before Greenfield joined Winston & Strawn. The Special Master was the Honorable R. Porter Murry, a retired superior court judge. On December 8, 1980, Judge Murry announced that he needed more help from counsel in calculating damages, but he ruled from the bench on liability.
The jury in the Winston & Strawn trial was read numerous stipulations of fact, and stipulation 45 provided: “On December the 8th, 1980, the Special Master stated at a hearing that he had found in favor of FormEze and Inryco against both Chanen and HRP.” After that, the only question left unresolved—and it was a complicated question—was the amount of damages the Special Master was going to award Form-Eze and *143Inryco against both Chanen and HRP. The eventual award of massive damages resulted, not because Greenfield acted with an evil mind towards HRP, but because—for reasons later found by the district court to be in large part clearly erroneous—the Special Master found the Form-Eze and Inryco arguments on damages more persuasive than those of Greenfield and his associates on behalf of Chanen and HRP.
2. Greenfield’s pro-Chanen contract defense failed: Greenfield has been faulted for arguing from the outset that Chanen was an agent and HRP was its disclosed principal and, therefore, any contract liability should be imposed solely on HRP. But the Special Master rejected this argument, the district court rejected it, and the Ninth Circuit rejected it. The district court adopted nearly all of the Special Master’s liability findings and conclusions, including:
6. Chanen was acting as the agent of HRP when it negotiated and entered into the Equipment Lease and Labor Guarantee, and when it executed the Letter of Clarification. This agency relationship, however, was not disclosed to Form-Eze until after these agreements had been entered into.
35. As a result of Chanen unilaterally dismissing [Form-Eze] from the jobsite, the Labor Guarantee, including the Security Interest, was terminated as of November 19, 1974.
68. Since Chanen’s agency was not disclosed as of the date on which the FormEze Equipment was leased, Chanen, or at Form-Eze’s election, HRP is liable to Form-Eze for [contract damages].
78. The defendants’ [Chanen and HRP] retention of the Inryco [formerly the Form-Eze] Equipment after July 30, 1975 was tortious, entitling Inryco under A.R.S. § 12-1301 et seq. to recover [tort damages].
3. HRP and Chanen were united in their tort defense: About eighty percent of the damages were tort damages for the wrongful detention of the forms. The Special Master awarded $3.6 million in damages, the district court reduced it to $800,000, and the Ninth Circuit raised it to $1.6 million. Of the Ninth Circuit award, the contract damages were about $20,000 to Form-Eze and about $290,000 to Inryco. The other $1.29 million was for wrongful detention of the forms, and fair market value of the forms.
There was much evidence that HRP was jointly hable with Chanen for the wrongful detention of the forms, and there was no evidence that Greenfield’s evil-minded conduct after March 1, 1981 was a cause of HRP’s tort liability. From the time of their 1975 detention, the forms were stored at a facility owned by an HRP partner. An August 6, 1975 letter from HRP (Barry Shapiro) to Chanen said, in part:
[S]ubject to my talking to Art Greenfield when he returns, it would appear that the direction which we should pursue with Form-Eze is to continue to hold the forms at National Metals as a means of leverage in collecting at least some of the excess dollars which you figure they owe us.
One of the exhibits at trial was a “Letter Agreement” signed by Chanen and HRP on October 6, 1977. This agreement provided that HRP would store the forms and that HRP would indemnify Chanen if it were later concluded that the detention of the forms was wrongful. (The agreement also provided that indemnification would not apply to damages attributable to the fault of Chanen.)
Another trial exhibit was a February 8, 1978 letter from Greenfield to HRP that began: “As you know, on numerous occasions in connection with this matter I have suggested that it would be more appropriate for the defendants other than Chanen Construction Company to be represented by separate counsel.” The letter discussed the “disclosed agent” theory (“[I]t has always been the situation that Chanen Construction Company was sued as the agent of the disclosed principal, HRP Hotel Company____”). The letter advised that Greenfield had been contacted by Inryco counsel with settlement overtures and that:
It seems imperative that the issue of utilization of the forms and perhaps even settlement of the entire litigation be vigorously pursued at this time. Accordingly, I *144again most strongly urge that your representation in connection with this matter be undertaken by counsel who is more familiar with the various aspects of the HRP Hotel situation than I.
The point here is this: If there was malpractice by Greenfield regarding what he did or did not advise HRP to do with the forms, the malpractice affected Chanen and HRP equally, it was not done with an evil-minded favoring of Chanen over HRP, and it was done long before March 1,1981—all of which means that there is no legal reason to penalize Winston & Strawn for that behavior.
4. HRP’s final argument: During trial there was little mention of Winston & Strawn, until final argument. HRP’s counsel, Robert A. Jensen, began his final argument by advising jurors that they could do nothing about the savings and loan scandals and they could do nothing about the AzScam scandal—except to pay higher taxes because of them—but they could do something about “one of the most powerful law firms in the country, Winston & Strawn.” Regarding the gross revenues of Winston & Strawn, counsel said: “They’re going to amaze you. They are rich and powerful.” Counsel then referred for the first time in the trial to the Winston & Strawn financial statement (which was in evidence by stipulation) and advised that Winston & Strawn had over $97 million in gross revenues and that, if the jury were to impose, say, only $600,000 in punitive damages, “you’re not even going to get their attention. They’re not going to look up from their coffee. They’re not going to rearrange their European vacations.” Counsel then suggested penalizing Winston & Strawn one month’s “wages,” about $8 million. In rebuttal, counsel implored: “But please, I have watched all my life, representing plaintiffs as I do, the rich and the powerful get away with it. Don’t let it happen here.” Counsel closed with a suggestion that an award of punitive damages in the amount of “several million dollars” was appropriate.
HRP’s call to arms against rich and powerful lawyers who “get away with it” has thus far succeeded with one Arizona jury and two Arizona courts—despite the fact that Winston & Strawn did nothing wrong. During argument on the motion for new trial, the trial court stated: “[Ejverybody agreed that the only basis for punitive damages against Winston & Strawn was based on the conduct of Art Greenfield. It wasn’t a claim that he was negligently hired or retained or supervised ... punitive damages were based exclusively on his conduct, correct, Mr. Jensen?” Jensen responded: “I believe that’s a fair statement, Your Honor.” That is indeed a fair statement, and it is also why $8 million is a fundamentally unfair penalty on Winston & Strawn.
HRP’s final argument is not mentioned here because of alleged error in it; able opposing counsel made no objections to the argument and therefore waived any error. Rather, HRP’s final argument is mentioned here to highlight the buttons that were pushed to produce this $3 million punishment of a blameless defendant. The jury did exactly what it was asked by HRP to do; it punished Winston & Strawn for wrongs much greater than—and wrongs completely unrelated to—the evil-minded conduct of Arthur P. Greenfield after March 1, 1981.
D. Measure of damages: Greenfield was the wrongdoer, and it is his financial condition that should have been relevant, not Winston & Strawn’s. See Shetka v. Kueppers, Kueppers, Von Feldt and Salmen, 454 N.W.2d 916 (Minn.1990), another case in which a law firm was held vicariously responsible for the evil-minded conduct of a partner—though in that case, the firm had dissolved and the vicarious liability was passed to the other partners. The Shetka court concluded that “for the purpose of determining the amount of a punitive damage award, the financial condition of a nonparticipating, nonculpable vicariously liable party is irrelevant, and, therefore, not discoverable.” Id. at 919.
In Wilson v. Riley Whittle, Inc., this Court held that “the trier of fact can award a higher amount of punitive damages against the master than the amount awarded against the servant.” 145 Ariz. 317, 322, 701 P.2d 575, 580 (App.1985). Even if the Wilson rule has merit regarding masters and servants, Shetka expresses a better rule for partnerships.
*145Assuming that the evidence supported any award of punitive damages for Greenfield’s evil-minded conduct after March 1, 1981, the gross (or net) revenues of Winston & Strawn are an unfair measure of punishment. By comparison, all direct and vicarious liability for Greenfield’s evil-minded conduct for the sixty-eight-month period from July 1975 to March 1981 was settled for a $1 million penalty. Winston & Strawn’s exposure for Greenfield’s conduct was six months, March to September, 1981. That Winston & Strawn had the misfortune of hiring Greenfield when it did, rather than six months later, is no reason for a $3 million penalty.
E. Due Process: If the factors required by Haslip and Hawkins are properly considered, I respectfully submit that the punitive damages penalty imposed on Winston & Strawn is unconstitutional, a taking without due process of law.
The trial court affirmed the award of punitive damages mainly because “based on the evidence presented concerning the financial worth of the Defendant [Winston & Strawn], the amount can not be said to be indicative of passion or prejudice.” The majority relies on the same sort of quantitative analysis, finding that: “The award is proportionate to Winston & Strawn’s financial position; it represents approximately 3.1 percent of the firm’s gross revenues for 1990.” Maj. at 135, 907 P.2d at 521. With respect, there is more to a punitive damages due process analysis than mathematics, especially when the defendant did nothing wrong. When measuring the fundamental fairness of a multi-million dollar punitive damages taking, especially on a vicarious liability theory, the court must articulate good reason for that penalty, something with more persuasive relationship to traditional notions of fundamental fairness than simply saying, “The defendant can pay it.”
Haslip provides that “the fact finder must be guided by more than the defendant’s net worth”; it also provides numerous factors to consider in the due process analysis, and advises that because those factors are applied by reviewing courts in Alabama, “Alabama plaintiffs do not enjoy a windfall because they have the good fortune to have a defendant with a deep pocket.” 499 U.S. at 21-22, 111 S.Ct. at 1045. Thus far, the same cannot be said about this Arizona plaintiff.
The punitive damages award should be reversed; failing that, the punitive damages offset should be affirmed.