Petition for Writ of Certiorari — Southern Union Co. v. Irvin
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(B) ...
(ii) A party intending to
challenge an order disposing of any
motion listed in Rule 4(a)(4)(A), or
a judgment altered or amended
upon such a motion, must file a
notice of appeal . . . within the time
prescribed by this Rule measured
from the entry of the order
disposing of the last such remaining
motion.
(5) Motion for Extension of Time.
(A) The district court may extend the
time to file a notice of appeal if:
(i) a party so moves no later
than 30 days after the time
prescnbed by this Rule 4(a) expires;
and
(ii) regardless of whether its
motion is filed before or during the
30 days after the time prescribed by
this Rule 4(a) expires, that party
shows excusable neglect or good
cause. ...
Rule 26 of the Federal Rules of Appellate Procedure
provides:
(b) Extending Time. “or good cause, the court
may extend the time prescribed by these rules or
4
by its order to perform any act, or may permit an
act to be done after that time expires. But the court
may not extend the time to file:
(1) a notice of appeal (except as
authorized in Rule 4)....
STATEMENT OF THE CASE
Southern Union, a natural gas utility, brought this action
against respondent James M. Irvin (“Irvin”), among others, '
in the United States District Court for the District of Arizona,
alleging that Irvin, Chairman of the Arizona Corporation
Commission (“ACC”), had misused his office intentionally
to interfere with Southern Union’s prospective business
opportunities and contractual relations. The basis for
jurisdiction in the District Court, the court of first instance,
was 28 U.S.C. § 1332. On December 18, 2002, the jury
returned a verdict against Irvin for $390,072.58 in
compensatory damages (after adjustment for comparative
fault) and $60,000,000 in punitive damages. On appeal, the
Ninth Circuit vacated the jury award of $60 million in
punitive damages and remanded for remittitur or new trial
on punitive damages.
1. Facts Relating To Untimeliness of Appeal
On January 3, 2003, without waiting for entry of
judgment, Irvin filed a timely post-trial motion, pursuant to
Fed. R. Civ. P. 50(b) and 59, for judgment notwithstanding
the verdict or for a new trial or remittitur. The District Court
1. The other defendants, all of whom settled with Southern
Union, included Southwest Gas Corporation, ONEOK Inc., Michael
Maffie, Thomas Hartley, Gene Dubay, Thomas Sheets, John
Gaberino, Jack D. Rose, Edward Zub and Larry W. Brummet.
5
denied Irvin’s post-trial motion in its entirety by an order
entered on July 28, 2003 (the “July 28 Order”). The District
Court entered a final judgment on the jury’s verdict on August
18, 2003.
Irvin filed his notice of appeal on August 29, 2003 —
32 days after entry of the July 28 Order. Irvin never filed a
motion with the District Court to extend his time to file
his notice of appeal pursuant to Fed. R. App. P. 4(a)(5). On
September 30, 2003, Southern Union moved in the Ninth
Circuit to dismiss Irvin’s appeal as untimely. On November
3, 2003, the motions panel denied the motion without
prejudice to renewal. Southern Union renewed its objection
to the Ninth Circuit’s jurisdiction in its brief in chief.
Under Fed. R. App. P. 4(a)(1), an appeal must be filed
“within 30 days after the judgment or order appealed from is
entered,” “except as provided in Rule. . .4(a)(4)” (emphasis
added). Fed. R. App. P. 4(a)(4)(A) requires that where, as
here, post-trial motions have been-timely_filed, a notice of
appeal must be filed within 30 days from the entry of the
order disposing of the last such post-trial motion. The July
28 Order disposed of Irvin’s post-trial motion, and Irvin’s
30-day appeal period ran from entry of the July 28 Order.
Irvin’s notice of appeal, filed 32 days later, was not timely
filed.
In its opinion, the Ninth Circuit acknowledged that
“(rjead literally, the rule [Rule 4(a)(4)(A)] applies,” and the
“appeal period expired August 28, 2003,” before the notice
of appeal was filed. Nonetheless, despite the plain language
of the applicable rule, the Ninth Circuit declined to dismiss
the appeal, stating that “[wJe do not believe that the rule was
intended to work in this way,” given that on July 28, 2003,
final judgment had not yet been entered. (6a) The Ninth
Circuit thus effectively extended Irvin’s time to file his notice
6
of appeal, although under Fed. R. App. P. 2 and 26(b)(1), it
was without authority to do so.
Il. Facts Underlying Jury’s Punitive Damages Verdict
Irvin intentionally abused his position as Chairman of
the ACC, a quasi-judicial body with the responsibility to
approve mergers between natural gas utilities, to derail a two
billion dollar offer from Southern Union to merge with
Southwest Gas Corporation (“Southwest”), which would
have created the largest natural gas utility in the country, in
favor of a competing, less favorable merger offer from
ONEOK, Inc. (““ONEOK”). In doing so, Irvin engaged in
trickery and deceit, sought to corrupt the regulatory process
in three states, and attempted to obstruct the judicial process
by lying on the witness stand, fabricating evidence and
destroying documents. Irvin’s surreptitious crusade to
derail Southern Union’s offer was driven by the undisclosed
financial interest of Irvin’s crony and politica] supporter, Jack
Rose (“‘Rose’’), in the competing ONEOK offer. All the while,
Irvin knew that his misconduct would cause at least $108
million — the difference between the Southern Union and
ONEOK offers — in actual harm to Southwest shareholders,
as well as hundreds of millions of dollars in lost profits and
other damages to Southern Union and in lost cost savings to
Arizona consumers.
1. Irvin's interest in the merger offer competition. Irvin
was elected one of the three commissioners of the ACC in
1997, served as Chairman of the ACC from November 1997
to May 1999, and continued to serve as ACC Commissioner
through and after trial.
The ACC is “treated as a fourth branch of government
in Arizona,” Polaris International Metals Corp. v. Arizona
Corporation Commission, 133 Ariz. 500, 506-7, 652 P.2d
1023, 1029 (1982), and serves a quasi-judicial function.
7
See, e.g., Arizona Constitution, Article 15, § 4 (ACC has the
“power to inspect and investigate the property, books, papers,
business methods, and affairs of ... any public service
corporation doing business within the State, and ... the
power of a court of general jurisdiction to enforce attendance
of witnesses and the production of evidence by subpoena,
attachment, and punishment . . .”).
In June 1997, Irvin nominated Rose, a lawyer who had
worked on Irvin’s campaign, to be Executive Secretary of
the ACC. On December 31, 1998, after ONEOK’s offer was
announced, Rose resigned as Executive Secretary, but two
days later, Irvin —- without the knowledge of the other ACC
commissioners — re-employed Rose as a “Loaned
Executive” to the ACC.
In December 1998, Southwest announced ONEOK’s
merger offer to Southwest shareholders at $28.50 per share.
Beginning that same month, after Irvin and Rose had
previously met with Prudential Securities, Inc. (“Prudential’’),
a New York investment bank, Rose pursued a business
relationship with Prudential, touting his connections with
Southwest and ONEOK, his ability to advise them on
important regulatory issues related to their merger, and his
ability to refer underwriting business to Prudential in
connection with the merger.
On February 1, 1999, Southern Union offered $32.00
per share, or $108 million more than ONEOK, with otherwise
identical merger terms. On February 21, 1999, the Southwest
Board of Directors unanimously determined that Southern
Union’s offer was “superior,” “doable” and had “the ability
to get regulatory approval.” Southwest Board members were
“excited about” and “very interested” in Southern Union’s
offer.
8
On February 12, 1998, Irvin told ONEOK’s Chairman
that he knew about Southern Union’s non-public offer, did
not want a “bidding war’ between ONEOK and Southern
Union, and planned to send a letter to the Southwest Board.
A few days later, ONEOK agreed that Rose could arrange a
meeting between Prudential and ONEOK.
On February 23, 1999 — just after Southern Union’s
offer became public — Rose began negotiating an agreement
with Prudential whereby Rose would be compensated for
referring business to Prudential. Telephone records
introduced at trial showed an increase in and distinct pattern
of communications beiween Irvin and Rose on or about this
and other critical dates.’
On March 5, 1999, Irvin told ONEOK that Rose had
given Irvin a “good report” on ONEOK, that Irvin intended
to contact the California Public Utilities Commission
(“CPUC”) and the Public Utilities Commission of Nevada
(“PUCN”) (which also had jurisdiction over a Southwest
merger), and that Irvin had concerns about Southern Union.
By that date, ONEOK attorneys already were working on a
letter (the “Irvin Letter’) for Irvin to send to the Southwest
Board to influence it to approve the ONEOK proposal over
the Southern Union proposal.
Already in March 1999, ONEOK well knew Irvin’s
power to influence the Southwest Board. As a ONEOK
lawyer (a friend of Irvin and Rose, who also campaigned for
Irvin) put it in contemporaneous notes introduced at trial:
Think they have [Southwest] Bd well in hand.
Letter from one or more Chair would sink
{Southern Union].... Having a regulator press
2. Asserting his Fifth Amendment right against self-
incrimination, Rose declined at trial to testify concerning his
conversations and dealings with Irvin.
9
the case made it extremely credible. . . Jim [Irvin]
can say [a Southern Union] application will either
not be approved, or approved [with] so many
restrictions that it won’t fit with [Southern
Union’s]} financing plan or will be unacceptable
to [Southern Union].
In March 1999, according to internal Prudential e-mails
introduced at trial, Rose was telling Prudential that ONEOK
had a strong motive to reward him for helping the company
obtain favorable regulatory action and that he was confident
that he could persuade ONEOK to name Prudential as a
managing underwriter. On March 10, 1999, a Prudential
executive reported that Rose said that “if he does deliver
[ONEOK] he wants to be paid big time.” That same day,
Prudential agreed to pay Rose a large percentage of fees paid
to Prudential by ONEOK. Rose and Irvin spoke for
24 minutes that day. On March 19, 1999, Rose and Prudential
executed the fee agreement, and Irvin and Rose again spoke
by telephone.
2. Irvin's improper interference. Having secured the fee
agreement with Prudential and their relationship with
ONEOK, Irvin and Rose then set about to interfere with
Southern Union’s merger proposal and to further ONEOK’s.
In March 1999, Irvin and Rose lobbied other state
regulators on behalf of ONEOK and against Southern Union.
On March 16, 1999, they met with CPUC representatives in
San Francisco, where Irvin urged the CPUC to send
Southwest the Irvin Letter favoring ONEOK. CPUC
commissioners testified that Irvin’s conduct was
inappropriate and that they would not have met with Irvin
had they known of Irvin’s and Rose’s involvement with
ONEOK and Prudential.
10
On March 24, 1999, Irvin and Rose also met in Reno with
the PUCN chair, who testified that Irvin urged her to send the
Irvin Letter to Southwest, but that she refused to do so. APUCN
attorney testified that the Irvin Letter could be “Exhibit | to an
interference with the prospective business advantage tort.” The
next day, Irvin met with the Nevada Governor, who was
Southwest’s former chairman. He also declined to send the Irvin
Letter, but, at Irvin’s instigation, called Southwest to advise the
Southwest Board to “read between the lines” of the Irvin Letter
the Board would soon receive.
Irvin then proceeded to lobby the Southwest Board directly.
In early April 1999, before the Southwest Board met to discuss
the competing merger offers, Irvin faxed Southwest the Irvin
Letter, which only Irvin signed, but which falsely purported to
represent the views of the CUPC and the PUCN as well. Irvin
then telephoned Southwest’s CEO and Chairman, who tape-
recorded the call, during which Irvin expressed “strong” views
about Southern Union’s supposed inability to obtain regulatory
approval for its merger proposal.
Irvin at all times concealed his activities from the ACC.
He did not disclose to his fellow ACC commissioners any of
the drafts of the Irvin Letter, and he did not give the ACC, CPUC
or PUCN notice when he sent the Irvin Letter to Southwest. He
also did not disclose his trips to the CPUC and PUCN, which
he arranged personally and for which he did not seek
reimbursement from the ACC (despite numerous pnor occasions
where he had sought such reimbursement for as little as 75
cents).
3. Irvin’ lobbying convinced the Southwest Board to reject
Southern Union and approve ONEOK. At the Southwest Board
meeting, the Board members read copies of the Irvin Letter and
listened to the tape-recording of the Lrvin telephone call. In
assessing the competing merger proposals, the Board members
were swayed by Irvin’s misrepresentations about Southern
11
Union’s supposed inability to receive regulatory approval.’
Those misrepresentations caused the Southwest Board’s
extraordinary rejection of Southern Union’s financially superior
proposal.‘
In April 1999, after its merger offer was approved,
ONEOK indicated its readiness to do business with
Prudential, and Rose began pressing Prudential to increase
substantially the fees payable to Rose for ONEOK business
brought to Prudential. In May 1999, Rose informed
Prudential that ONEOK agreed to hire Prudential as
underwriter to finance the Southwest merger. On June 11,
1999, Rose e-mailed Prudential concerning ONEOK’s
obtaining regulatory approval in Nevada (“We had a major
win”) and its progress in Arizona. A few days later, Rose
and Prudential signed a new agreement providing for the
increased compensation for Rose. Again, on days when Rose
had these and other critical communications and meetings
with ONEOK and Prudential, Rose had frequent and lengthy
telephone calls with Irvin.
3. There of course is no evidence that Irvin was | mpaigning
against the Southern Union proposal for anything other than personal
gain, given that there was no basis whatsoever for his
misrepresentations concerning Souther Union and, indeed, that the
has never been regulatory denial of a natural gas company merger in
the history of the country.
4. Southwest Board members testified to this effect in
contemporaneous shareholder derivative litigation. Moreover, in its
April 26, 1999 press release announcing that the Board had rejected
Southern Union’s higher offer in favor of ONEOK’s, Southwest
Stated:
{T]he Southwest Gas Board believes that Southern
Union would face a more protracted and difficult time
in obtaining regulatory approvals, extending eighteen
months or longer.
12
Shortly after the complaint in this action was filed on
July 19, 1999, ONEOK canceled the planned $300 million
debt offering to finance the Southwest merger. The ONEOK-
Southwest merger was later abandoned.
4. Irvin’s attempts to obstruct the judicial process in this
action. AnACC employee testified at trial that Irvin, in July
1999, personally shredded the majority of documents
gathered by his secretary as responsive to a subpoena served
on him to produce documents related tu the Southwest
merger, and when he gave the few remaining documents back
to his secretary, Irvin said about the subpoena response:
“Now it’s ready.”
Irvin fabricated evidence for trial. Immediately before
trial in 2002, Irvin’s counsel announced that new exculpatory
evidence had been discovered — a set of “contemporaneous”
1999 notes by Irvin’s wife of a telephone conversation during
which Rose supposedly stated that Irvin was not involved in
any misconduct. After Southern Union received the original
notes for forensic examination, Irvin’s counsel retracted the
claim and told the District Court that the notes were written
the week before trial.
Irvin also testified falsely at trial. For example, Irvin
testified that he called Southwest on April 5, 1999 only to
confirm Southwest’s receipt of the Irvin Letter. However,
Southwest witnesses — in testimony and contemporaneous
notes — established that Irvin’s call was a planned,
substantive attack on Southern Union. Irvin also testified
falsely that he had not discussed the Southwest merger with
CPUC regulators, contrary to their testimony that Irvin gave
an appearance of partiality, lobbied for ONEOK and
prejudged and disparaged the Southern Union offer.
13
5. The enormous resulting harm. Irvin’s conduct caused
enormous harm well beyond Southern Union’s $390,000 in
out-of-pocket compensatory damages. Irvin knowingly
caused Southwest shareholders to lose at least $108 million.
Irvin caused Southern Union to suffer over $500 million in
potential lost profits. Because of Irvin’s misconduct, natural
gas consumers in Arizona lost hundreds of millions of dollars
in potential cost savings that would have resulted from the
Southern Union merger proposal. Finally, Irvin’s abuse and
breach of the public trust placed in him by the citizens of
Arizona caused immeasurable public harm.
6. The Ninth Circuit's opinion. The Ninth Circuit agreed
that the reprehensibility of Irvin’s conduct justified an award
of punitive damages based on, among other things, his
“exploitation of high public office,” his pursuit of a “payoff,”
and the “grave injuries to the judicial process.” Nonetheless,
while stating that it did “‘not mean to minimize the magnitude
of Irvin’s exploitation of his office” (22a), the Ninth Circuit,
focusing on the compensatory damages and not on the
enormous other actual and potential harm caused by Irvin’s
misconduct, held that the ratio of punitive to compensatory
damages could not “survive the constitutional scrutiny”
required by this Court (19a). The Ninth Circuit concluded
that the District Court mistakenly relied on the ratios in civil
rights cases as a benchmark in approving the ratio here,
Stating that the “redress of racial, religious or gender
discrimination has been treated as a special area of public
concern” (22a), notwithstanding that Irvin’s conduct caused
severe harm to the public interest. The Ninth Circuit also
ignored the clear historical record cited by the District Court
(52a - 54a) demonstrating that punitive damages were first
imposed and, indeed, are particularly needed precisely to
punish official misconduct and public corruption exemplified
by Irvin’s conduct.
14
REASONS FOR GRANTING THE PETITION
I. The Ninth Circuit’s Refusal To Dismiss The Appeal
Contravenes Applicable Appellate Rules And This
Court’s Decisions
There is no question as to the plain language and effect
of Fed. R. App. P. 4 here. Rule 4(a)(1) provides that a notice
of appeal must be filed within 30 days after entry of the
“judgment or order appealed from,” “except as provided in
Rule 4(a)(4)” (emphasis added). Rule 4(a)(4)(A) provides
that if one or more enumerated post-trial motions —
including Rule 50(b) and Rule 59 motions — are timely filed,
then the 30-day period runs not from the entry of the
“judgment or order appealed from” but from the entry of the
“order disposing of the last such remaining motion.”
Irvin’s 30-day appeal period therefore ran from entry of
the July 28 Order, which disposed of all of the relief requested
in his post-trial motion under Rules 50(b) and 59. The Ninth
Circuit in fact agreed with all this; it identified no ambiguity
in Rule 4: “Read literally, the rule applies... . The appeal
period expired August 28, 2003 [sic].”° (6a) (emphasis
added).
Irvin filed his notice of appeal on August 29, 2003.
This filing thus was untimely under what the Ninth Circuit
itself agreed is the “literal” — that is, plain — language of
Rule 4. The Ninth Circuit declined to dismiss the appeal,
because “[w]e do not believe that the rule was intended to
work in this way’ (6a) — i.e., for Irvin’s 30-day appeal period
to begin to run before entry of the judgment on August 18,
2003. However, in doing so, the Ninth Circuit contravened
not basi the clear appen! time provisions of Rule 4, but also
5. In fact, the appeol period expired on August 27, 2003, 30
days from July 28, 2003.
15
the clear limit, under Rules 2 and 26(b), on its authority to
suspend provisions of the appellate rules. The Ninth Circuit’s
decision also conflicts with this Court’s decisions in Eberhart
v. United States, 126 S. Ct. 403 (2005) (courts must enforce
filing periods w. ether they are jurisdictional or properly
invoked claim processing rules which are “inflexible”);
Torres v. Oakland Scavenger Co., 487 U.S. 312 (1988) (courts
of appeals are not permitted to extend the time for filing a
notice of appeal); Acosta v. Louisiana Dept of Health &
Human Res., 478 U.S. 251 (1986) (reversing Ninth Circuit’s
refusal to follow plain wording of Rule 4); and Browder v.
Director, Dep t of Corrections of Illinois, 434 U.S. 257 (1978)
(timely filing of notice of appeal is mandatory and
jurisdictional).
A. The Ninth Circuit Had No Authority To
Extend Irvin’s Time To File His Notice of Appeal
Fed. R. App. P. 2 gives the courts of appeals the power
for “good cause” to suspend any provision of the appellate
rules, with one exception —- “except as provided in Rule
26(b).” Rule 26(b) provides that the courts may not extend
the time to file a notice of appeal, “except as authorized in
Rule 4.” However, Rule 4 authorizes only the district courts,
not the courts of appeals, to extend the time to file a notice
of appeal and then only if a party so moves within certain
time limits. Fed. R. App. P. 4(a)(5). Here, Irvin never moved
to extend the time to file his notice of appeal.
By declining to dismiss Irvin’s appeal, the Ninth Circuit
effectively suspended the clear provisions of Rule 4: it
(retroactively) extended by two days the time for Irvin to
file his notice of appeal. However, under Rules 2 and 26(b),
the Ninth Circuit lacked the authority to do so.
16
The Ninth Circuit’s decision thus also is contrary to this
Court’s holding in Torres, 487 U.S. at 317, that a court “may
not waive the jurisdictional requirements of [Rule 4], even for
‘good cause shown’ under Rule 2, if it finds that they have not
been met.” Indeed, this Court made clear that, given Fed. R.
App. P. 2, the courts of appeals must apply Rule 4 in an
“implacable fashion,” even if it leads to a “harsh result.”
487 U.S. at 318.° Here, the Ninth Circuit admitted that Irvin
had not met the “literal” requirements of Rule 4, yet it
impermissibly failed to enforce them.
B. This Court Has Made Clear That Rule 4
Must Be Enforced According To Its Plain Terms
The Ninth Circuit’s holding conflicts also with this Court’s
decision in Acosta, 478 U.S. at 253-54. There, this Court
expressly disapproved the Ninth Circuit’s decision in Calhoun
v. United States, 647 F.2d 6 (9" Cir. 1981), in which the Ninth
Circuit accepted an appeal by reading out of an earlier version
of Fed. R. App. P. 4(a)(2), the phrase “[except] as provided in
(a)(4) of this Rule 4.” 478 U.S. at 254. That phrase no longer
appears in Rule 4(a)(2), but it is the same phrase that the Ninth
Circuit here has read out of Rule 4(a)(1) — where it now appears
— in order to save Irvin’s appeal.
Acosta stands for the teaching that the courts of appeals
must follow the “plain wording of the Rules” and, in particular,
the “plain import of [the] language” of Rule 4. 478 U.S. at 253-
54. Ignoring Acosta, however, the Ninth Circuit once again has
declined to apply the plain language of Rule 4’ and has
6. The amendments to Rules 2 and 4 since Jorres was handed
down are immaterial here.
7. That the Ninth Circuit’s refusal to apply Rule 4’s plain
language is unjustified is confirmed by Rule 4(b)(3)(A). That Rule
(Cont'd)
17
attempted to justify its departure from that language by
inveking the purrorted policy underlying the Rule.® (6a)
(Cont'd)
provides that the time to file a notice of appeal in a criminal! case
runs from the entry of the order disposing of the last post-trial motion
or the entry of the judgment of conviction, “whichever is later” —
in effect, the result adopted here by the Ninth Circuit in this civil
action. However, if the drafters of the Rules had intended that same
result in civil cases, they clearly knew how to draft for it. That they
did not confirms, under well-settled principles of construction,
e.g., Swierkiewicz v. Sorema N.A., 534 U.S 506, 513 (2002), that the
Ninth Circuit’s view of the intent of the Rules is incorrect.
Likewise, the plain meaning of Rule 4(a)(4)(B)(ii) ts inconsistent
with the Ninth Circuit’s decision here. Rule 4(a)(4)(B){ii) requires
that a notice of appeal be filed 30 days after entry of the order
disposing of the last remaining Rule 4(a)(4)(A) post-trial motion,
even where the order requires entry of an amended judgment.
The appeal period does not start running again from entry of the
amended judgment (as it should if the Ninth Circuit’s re-writing of
Rule 4 were correct).
8. ABF Capital Corp. v. Osley,414 F.3d 1061 (9" Cir. 2005),
reaches a result similar to the Ninth Circuit’s here, but is equally
wrong in refusing to apply the plain language of Fed. R. App. P. 4.
Osley relies on the separate document requirement codified at
Fed. R. Civ. P. 58(a) to hold that a “premature post-judgment motion
may not accelerate the deadline for appeal before a separate document
has been entered.” 414 F.3d at 1065. However, the separate document
requirement codified at Fed R. Civ. P. 58(a) has no bearing here. Its
purpose has always been to clarify when appeals begin to run arising
from final judgments, not orders disposing of the post-trial motions
enumerated in Rule 4(a)(4)(A). Indeed, Rule 58(a)(1) expressly
exempts from the separate document requirement orders on those
motions. Moreover, under Rule 58(b)(1), when such an order on an
enumerated motion is “entered in the civil docket under Rule 79(a),”
“[j]udgment is entered[.]” In this case, the July 28 Order was entered
in the civil docket on July 28, and “judgment” was entered. Moreover,
the Osley court incorrectly characterized the Rule 59(e) motion in
that case as “premature.” Nothing in any rule bars the filing of that
(Cont'd)
18
In Acosta, this Court soundly rejected such an approach.’
See also Business Guides, Inc. v. Chromatic Communications
Enterprises, Inc., 498 U.S. 533, 540-41 (1991) (“We give
the Federal Rules of Civil Procedure their plain meaning.
As with a statute, our inquiry is complete if we find the text
of the Rule to be clear and unambiguous.”) (citation omitted);
Pavelic & LeFlore v. Marvel Entertainment Group, 493 U.S.
120 (1989) (same).
C. Whether Jurisdictional Or Not, The Rule
4(a)(4)(A) Appeal Period Must Be Enforced
Inflexibly
The Ninth Circuit’s decision also conflicts with this
Court’s teaching in its recent decision in Eberhart, in which
the Court clarified that certain rules that have been described
as “mandatory and jurisdictional” — i.e., non-waivable —
(Cont'd)
motion or the other enumerated motions — including the motion
filed by Irvin — before entry of judgment. See Fed. R. Civ. P. 58
2002 advisory committee’s note (“Many of the enumerated motions
are frequently filed before judgment is entered.”).
9. The need for uniformity and certainty in the interpretation
of Rule 4 is clear:
[A]llowing courts to give different meanings from case
to case allows them to expand and contract the scope of
their own competence. That this is not envisioned is plain
(if any citation is needed) from Rule 26(b) of the Federal
Rules of Appellate Procedure, which specifically excepts
from the courts’ broad equitable power to “suspend the
requirements or provisions of any of these rules in a
particular case,” Fed. Rule App. Proc. 2, the power to
“enlarge the time ivr filing a notice of appeal.”
Houston v. Lack, 487 U.S. 266, 279-80 (1988) (Scalia, J., dissenting)
(Rehnquist, O’Connor, Kennedy joining).
19
are in fact better described as “inflexible claim-processing”
rules — which, unless properly invoked, may be waived.
126 S. Ct. at 407. However, this Court made clear that the
time periods in the federal rules are to be strictly applied
whether those time periods are characterized as
“Jurisdictional” or as “inflexible claim-processing rules.”
Id. at 406-407. ——
Although Eberhart did not decide the issue, it appears
that — as this Court has repeatedly stated — the Rule
4(a)(4)(A) appeal period provisions are mandatory and
jurisdictional. See, e.g., Browder, 434 U.S. at 561; Brickwood
Contracts, Inc. v. Datanet Engineering, Inc., 369 F.3d 385,
392 (4" Cir. 2004). In either event, however, even if
Rule 4(a)(4)(A) is a “claim-processing” rule, Southern Union
properly invoked it in the Ninth Circuit, and its application
— as Eberhart makes clear — is inflexible.
D. The Ninth Circuit’s Reasoning For Rewriting
Rule 4 Was Flawed
The Ninth Circuit declined to dismiss the appeal on the
ground that when the July 28 Order was entered, “final
judgment including the damages had not yet been entered.”
The court asked rhetorically: “What would Irvin have
appeaied?” (6a) Even assuming arguendo that such a
supposed anomaly entitled the Ninth Circuit unilaterally to
rewrite Rule 4 — which it does not — the court’s reasoning,
like its reference to Alice in Wonderland (6a), is flawed. There
is no anomaly here, and any harsh result could have been
avoided without overriding Rule 4’s plain language.
First, to answer the Ninth Circuit’s rhetorical question:
before (or in the absence of) entry of final judgment, Irvin
could have and should have appealed from the July 28 Order
itself. Indeed, Rule 4(a)(4)(B)(i1) contemplates just such an
20
appeal: “A party intending to challenge an order disposing
of any motion listed in Rule 4(a)(4)(A) . . . must file a notice
of appeal... .” Here, the July 28 Order was a final appealable
order under 28 U.S.C. § 1291. See Hollywood v. City of Santa
Maria, 886 F.2d 1228, 1232 (9" Cir. 1989) (“[A]s is generally
the case in the Rule 59 context, the order denying the motion
for new trial definitively signal[s] the end of the litigation.”).
In this case, because the final judgment altered neither the
jury verdict nor the July 28 Order, the mere fact that the final
judgment was entered after the July 28 Order does not affect
the finality of that order for purposes of appealability under
28 U.S.C. § 1291. In re Slimick, 928 F.2d 304, 308 (9" Cir.
1990) (“It is irrelevant that the court designated the first
disposition an order and the later disposition a judgment.
Appealability turns on the effect of the ruling, not the label
assigned to it by the trial court.”).
However, even assuming arguendo that the July 28 Order
disposing of Irvin’s post-trial Rule 50(b) and 59 motion were
not appealable, Irvin, faced with Rule 4’s plain language,
could have and should have filed his motion after, not before,
the entry of the final judgment. Under Fed. R. Civ. P. 50(b)
and 59(b) and (c), motions under Rules 50(b) and 59 need
only be filed “no later than 10 days after entry of judgment.”
Although there is no requirement that the post-trial motions
enumerated in Rule 4(a)(4)(A) be filed after entry of the
judgment, Irvin of course could have done so.
Alternatively, Irvin, after filing his post-trial motion
before entry of judgment, could have and should have moved
the District Court to extend his time to file his notice of appeal
pursuant to Fed R. Civ. P. 4(a)(5)."°
10. Even without an extension, Irvin had nine days after entry
of the judgment (August 19 through August 27, 2003) to file a notice
of appeal cn a timely basis.
~ or
Having failed to take either course of action, Irvin should
not now be heard to complain about the consequences for
his appeal of the plain language of Rule 4.
II. The Ninth Circuit Misapplied This Court’s
Decisions In Vacating The Punitive Damages Award
This Court has never before ruled on the constitutionality
of a punitive award outside of the civil rights context against
a public official who abuses his office and whose conduct
causes actual and potential harm far exceedingthe amount
of compensatory damages. This Court’s review of the Ninth
Circuit’s decision here would clarify, for the first time, the
extent to which substantial punitive damages may, consistent
with due process, be assessed against such a corrupt public
official and the extent to which such actual and potential
harm —- including harm resulting from obstruction of the
judicial process — may justify a punitive award.
These important issues are all the more ripe for this
Court’s review because, in vacating the punitive award here,
the Ninth Circuit misapplied the governing standards set forth
in this Court’s decisions.
A. The Ninth Circuit Erroneously Focused On the
Ratio Of Punitive To Compensatory Damages
Here, the Ninth Circuit vacated the $60 million punitive
award on the ground that the ratio of punitive to
compensatory damages of over 153 to 1 was too high.
However, the Ninth Circuit ignored the fact that Irvin’s
misconduct in blocking the financially superior Southern
Union offer caused at least $108 million in harm to Southwest
shareholders — which would give rise to a ratio of punitive
damages to actual harm of only 0.55.
22
The Ninth Circuit likewise ignored the fact that Irvin’s
misconduct caused even more enormous potential harm to
Southern Union and Arizona consumers, as well as to the
public interest. However, this Court has made clear that the
constitutionality of a punitive award is measured not merely
by the compensatory damages, but also by the other actual
and potential harm caused by defendant’s misconduct:
[T]his Court [has] eschewed an approach that
concentrates entirely on the relationship between
actual and punitive damages. It is appropriate to
consider the magnitude of the potential harm that
the defendant’s conduct would have caused to its
intended victim if the wrongful plan had
succeeded, as well as the possible harm to other
victims that might have resulted if similar future
behavior were not deterred.
TXO Production Corp. v. Alliance Resources Corp., 509 U.S.
443, 460 (1991) (emphasis in original). See also State Farm
Mut. Ins. Co. v. Campbell, 538 U.S. 408, 425 (2003) (greater
ratios may comport with due process where “a particularly
egregious act has resulted in only a sma! amount of economic
damages” or where the “injury is nard to detect or the
monetary value of noneconomic harm might have been
difficult to determine”); BMW of North America v. Gore, 517
U.S. 559, 582 (1996).
The Ninth Circuit paid lip service to the other harm
caused by Irvin’s conduct, noting certain of the components
of the harm Irvin caused — but ignored the $108 million
loss to Southwest shareholders, Southern Union’s lost profits,
and Arizona consumers’ lost savings. Instead, focusing
exclusively on the compensatory damages, the Ninth Circuit
expressed shock at the ratio of 153 to 1. (19a)
23
However, had the Ninth Circuit followed this Court’s
mandate in 7XO to compare the punitive award to all of the
potential harm Irvin’s conduct caused, the Ninth Circuit’s
shock surely would have “dissipate[d],” Z7XO, 509 U.S. at
462 (approving ratio of 526 to 1). Given Irvin’s egregious
conduct and the harm it caused, the 153 to 1 ratio entirely
comports with due process requirements. As this Court stated
in 7XO, “{w]hile petitioner stresses the shocking disparity
between the punitive award and the compensatory award,
that shock dissipates when one considers the potential loss
to respondents ... had petitioner succeeded in its illicit
scheme.” Jd. at 462.
B. The Ninth Circuit Ignored The Fact That Irvin
Was On Notice That His Reprehensible
Misconduct Would Cause Enormous Harm
In Campbell, this Court made clear that due process is
implicated in punitive damages awards because “elementary
notions of fairness enshrined in our constitutional
jurisprudence dictate that a person receive fair notice not
only of the conduct that will subject him to punishment, but
also of the severity of the penalty that a State may impose.”
538 U.S. at 417; Gore, 517 U.S. at 574.
Here, there can be no question that Irvin knew that
abusing his public office and obstructing the judicial process
— conduct he went to extraordinary lengths to try to conceal
— would and should “subject him to punishment.” There
can also be no question that he knew of the magnitude of the
actual harm his conduct would cause Southwest shareholders
and of the non-economic harm to the public trust. As the
District Court found, “Irvin’s undisputed experience and
knowledge made him aware of the potential enormous risks
that his conduct would have in disrupting a multi-million
dollar transaction.” (62a)
24
The Ninth Circuit, however, erroneously failed to take
into account that Irvin thus was at all times on notice that
his conduct could — and indeed, should — give rise to a
$60 million punitive award, if not more.
C. The Ninth Circuit Failed To Recognize
That The Punitive Damages Award Was
Justified By Irvin’s Breach Of The Public Trust
The reprehensibility of a defendant’s misconduct is
“perhaps the most important indicium of the reasonableness
of a punitive damages award.” Gore, 517 U.S. at 575. If any
misconduct is reprehensible, it is that of an elected official
who abuses the trust of the very public he is charged with
protecting. Overwhelming evidence at trial portrayed a
defendant who, through a course of misconduct lasting many
months, abused his position of trust, a position to which he
was elected by the citizens of Arizona, to the detriment not
only of plaintiff, but Southwest shareholders, Arizona
consumers and the public at large. When that official sits in
a quasi-judicial capacity, as this defendant did, the degree of
reprehensibility is all the greater. To make matters worse,
when an elected official sitting in a quasi-judicial capacity
not only refuses to take responsibility for his misconduct,
but seeks to obstruct justice by destroying and fabricating
evidence, a jury is entitled to conclude, consistent with due
process, that very significant punitive damages are necessary
to deter that defendant (and others) from future misconduct.
Because Irvin’s campaign against Southern Union
‘involved both “repeated actions” and harm caused by
“trickery or deceit”, Campbell, 538 U.S. at 419 (quoting
Gore, 517 U.S. at 575), it is a textbook case of the type of
reprehensible conduct this Court has recognized warrants
substantial punitive damages. Indeed, the very facts that were
absent in Gore — “deliberate false statements, acts of
affirmative misconduct, or concealment of evidence of
25
improper motive,” 517 U.S. at 579 — are glaringly present
here. Also, unlike in Campbell, where the defendant was
being punished for acts in other jurisdictions — acts which
were “dissimilar” and “independent from the acts upon which
liability was premised,” and which might have been lawful
in those other jurisdictions, 538 U.S. at 422 — Irvin’s
punishment, as noted by the District Court (44a), was
“premised on a series of events causing a single identifiable
harm: disruption of the Southern Union-Southwest Gas
merger” and on conduct not legal or proper anywhere.
In addition, ample evidence at trial — ignored by the
Ninth Circuit — established that Irvin’s misconduct caused
harm to Arizona consumers that was not reflected in the jury’s
compensatory damages award. The cost savings from a
Southern Union-Southwest merger would have been shared
with Arizona ratepayers in the hundreds of millions of dollars.
The District Court properly considered the loss of these
benefits to consumers in assessing the punitive damages.
Particularly given that Irvin’s reprehensible actions as a
public official harmed the public trust, the District Court
correctly relied upon numerous cases brought pursuant to
42 U.S.C. §§ 1981, 1983, in which courts have upheld
significant punitive damages awards, even where
compensatory damages are nominal, because “a violation of
the public trust is itself a considerable, cognizable harm,
though one without a definitive monetary value.” (55a) The
District Court persuasively noted the similarities between
this case and civil rights cases. See 59a (“[T]he conduct here
bears the halimarks of a civil rights action, including an
official acting under color of state law, intentional
misconduct, and biased and differential treatment of parties
before the [ACC] in ways that undermine due process and
equal protection of the laws.”). The District Court also
appropriately noted, citing Zarcone v. Perry, 572 F.2d 52,
26
56-7 (2d Cir. 1978), that the “civil rights cases reflect a
broader goal of deterring abuses of the public trust by public
officials that is not limited to individual constitutional rights
violations.” (61a)
The Ninth Circuit held that the District Court was,
however, “mistaken” in using punitive awards in civil rights
cases as a “bench mark,” because those cases address a
“special area of public concern where affront to human
rights” may require higher awards. (22a) The Ninth Circuit’s
reasoning is unpersuasive. Irvin’s conduct implicates public
concerns — including protection of the public trust in elected
and judicial officials and prevention of obstruction of justice
— that, while perhaps not precisely the same as those
implicated in civii rights cases, are also of similar great and
overriding importance.
Indeed, as the District Court also showed, punitive
damages originally were developed specifically as a means
to punish misconduct of public officials, particularly where
the monetary or physical damage was limited. (53a) See Lane
County v. Wood, 298 Or. 191, 200, 691 P.2d 473, 477 (1984)
(“Historically, oppressive conduct by public offices was the
situation where early judges were most prone to sanction
exemplary damages, and by which they justified and
rationalized the doctrine.”) (quoting McCormick, Damages
288, § 81 (1935)); Restatement (Second) of Torts § 908,
comment c (“{I]n the earliest cases in which punitive damages
were allowed, the plaintiffs suffered no substantial harm, or
at least no physical or financial harm appeared. These were
the cases in which public officials were guilty of outrageously
oppressive conduct”); Michael L. Rustad & Thomas H.
Koenig, Zaming the Tort Monster: The American Civil Justice
System as a Battleground of Social Theory, 68 Brook. L.
Rev. 1, 57 (2002) (early English courts “imposed these first
exemplary damage awards against public officials who
abused power in their official capacity’).
27
This Court looks to such historical information in
assessing punitive damages. See, e.g., Gore, 517 U.S. at
580-81. Nonetheless, the Ninth Circuit overlooked this
information, summarily rejected the District Court’s analysis,
and thus inappropriately vacated the punitive damages award.
Finally, the District Court properly considered Irvin’s
persistent and egregious effort to conceal his misconduct.
(42a-43a) Irvin’s approach to defending himselfin this action
was to fabricate evidence, destroy documents and make false
statements while testifying. This concealment and obstruction
of justice — in and of itself — clearly deserved very severe
sanction. See, e.g., Pacific Mut. Life Ins. Co. v. Haslip, 499
U.S. 1, 21-22 (1991) (citing “concealment” as a factor in
awarding punitive damages).
In short, Irvin’s conduct justified the jury’s punitive
award. That conduct was much more reprehensible than the
defendant’s conduct in 7XO, where this Court approved a
ratio of 526 to 1. Certainly, the courts should be careful, in
accordance with this Court’s decisions, to guard against
excessive punitive damage awards that do not comport with
due process. That clearly is not the case here, however, where
the punitive award does comport with due process and those
decisions. Indeed, punishing and preventing official and
judicial misconduct — as the jury correctly sought to do here
— itself vindicates constitutional concerns and values,
including, in this case, as the District Court recognized (59a,
60a-61a), due process and equal protection. That the Ninth
Circuit incorrectly rejected the award here, and rejected it so
summarily, suggests that further guidance from this Court is
appropriate.
28
CONCLUSION
The petition for a writ of certiorari should be granted.
Respectfully submitted,
Eric D. HERSCHMANN*
DANIEL R. BENSON
MICHAEL M. Fay
DANIELA RAZ
KasoOwITz, BENSON, TORRES
& FRIEDMAN LLP
1633 Broadway
New York, NY 10019
(212) 506-1700
CHRISTINA CARLSON Dopps Tom Q. FERGUSON
BisHop LONDON BropHy DOERNER, SAUNDERS, DANIEL
Dopps, PC & ANDERSON, L.L.P.
106 E 6th St, Suite 700 320 South Boston Avenue
Austin, TX 78701 Suite 500
(512) 479-5900 Tulsa, OK 74103
(918) 582-1211
* Counsel of Record
Counsel for Petitioner
APPENDIX
la
AI} PENDIX A — AMENDED OPINION OF THE
U] iTED STATES COURT OF APPEALS FOR THE
NiNTH CIRCUIT ENTERED SEPTEMBER 16, 2005
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
423 F.3d 1117,
415 F.3d 1001
SOUTHERN UNION COMPANY,
a Delaware corporation,
Plaintiff-Appellee,
v.
SOUTHWEST GAS CORPORATION, a California
corporation; ONEOK INC., an Oklahoma corporation;
MICHAEL MAFFIE; THOMAS HARTLEY; GENE
DUBAY; THOMAS SHEETS; JOHN GABERINO; JACK
D. ROSE; EDWARD ZUB; LARRY W. BRUMMETT,
Defendants,
and
JAMES M. IRVIN,
Defendant-Appellant,
SOUTHERN UNION COMPANY,
a Delaware corporation,
Plaintiff-Appellant,
Vv.
SOUTHWEST GAS CORPORATION, a California
corporation; ONEOK INC., an Oklahoma corporation;
MICHAEL MAFFIE; THOMAS HARTLEY; GENE
DUBAY; THOMAS SHEETS; JOHN GABERINO; JACK
D. ROSE; EDWARD ZUB; LARRY W. BRUMMETT,
Defendants,
2a
Appendix A
and
JAMES M. IRVIN,
Defendant-Appellee.
Nos. 03-16649, No. 03-16729
Argued and Submitted, May 10, 2005
July 13, 2005, Original Opinion Entered
Sept. 16, 2005, Amended Opinion Entered
Before: REINHARDT, NOONAN, and FERNANDEZ,
Circuit Judges.
NOONAN, Circuit Judge:
James M. Irvin, a citizen of Arizona, appeals the
judgment of the district court in favor of Southern Union
Company, a Delaware corporation, on Southern Union’s
claims of tortious interference with a business expectancy
and tortious interference with contractual relations, as a result
of which Southern Union was ultimately awarded $390,072
in compensatory damages and $60,000,000 in punitive
damages. Southern Union cross-appeals the district court’s
decision to keep its claim of lost profits from the jury.
We hold, first, that the appeals were timely filed; second,
that the compensatory damage award should be affirmed;
and third, that the punitive damages are constitutionally
disproportionate to the harm found.
Jurisdiction. The case was brought by Southern Union
under the Racketeer Influenced and Corrupt Organizations
Act (RICO), 18 U.S.C. § 1961, and as a suit asserting
diversity jurisdiction under 28 U.S.C. § 1332. In the course
of the proceedings, various defendants settled with Southern
3a
Appendix A
Union; the RICO claim dropped out; and only the business
and contract torts went to the jury. In this court, our first
question is the timeliness of Irvin’s appeal; the timeliness of
Southern Union’s cross-appeal is dependent on our finding
Irvin’s appeal timely. We state the facts relevant to this issue.
On December 18, 2002, the jury returned its verdict in
favor of Southern Union. The jury awarded damages of
$975,181 on the contract claim, with 40% liability assigned
to Irvin. The jury awarded $975,181 on the business
relationship claim with 20% liability assigned to Irvin. The
jury awarded $60 million in punitive damages. On January
9, 2003, Irvin moved for judgment notwithstanding the
verdict (JNOV) or in the alternative for a new trial or
remittitur. On January 24, 2003, the district court issued a
ruling as to the proposed form of judgment, taking into
account that the jury had assigned different percentages of
responsibility to Irvin for the two torts for which the jury
held him responsible. The court ruled that the two percentages
should be averaged to determine Irvin’s liability. On June 2,
2003, the district court denied Irvin’s motion for JNOV. On
July 28, 2003, the district court again denied Irvin’s motion
for JNOV and also his motion for a new trial or remittitur.
This order, in its entirety, read:
Pending before Court is Defendant Irvin’s
Amended Motion for JNOV or in the Alternative
for New Trial or Remittitur. The Court has
reviewed the briefing, and will deny the motion.
A written opinion will follow carly next week.
4a
Appendix A
Accordingly,
IT IS ORDERED that Defendant Irvin’s Amended
Motion for JNOV or in the Alternative for New Trial or
Remittitur is DENIED.
DATED this 25 day of July, 2003.
This order was communicated to counsel and docketed
on July 28, 2003.
On July 31, 2003, the district court signed a second Order
which dealt with Irvin’s two post-trial motions, analyzed
them in detail, and denied them. This order was docketed
August 1, 2003.
On August 14, 2003, the district court signed what it
termed “Final Judgment.” It read, in its entirety, as follows:
These consolidated actions came on for jury trial
on October 29, 2002, the Honorable Roslyn O.
Silver presiding. On December 18, 2002, all
remaining matters having been duly tried and
submitted to the jury, the jury rendered its verdict
in matter CIV-99-1294-PHX-ROS. Judgment is
hereby entered in favor of Southern Union
Company and against Defendant James M. Irvin
as follows: (1) On Southern Union’s claim for
intentional interference with contract, the sum of
$975,181.46, adjusted by relative degrees of fault
to $390,072.58; (2) On Southern Union's claim
for intentional interference with business
Sa
Appendix A
expectancy, the sum of $975,181.46, adjusted by
relative degrees of fault to $195,036.29; (3) The
higher amount of $390,072.58 constitutes the total
actual damages assessed against Defendant [rvin,
and in favor of Southern Union; (4) Punitive
damages in the sum of $60,000,000.00; (5) Its cost
of suit as taxed by the Clerk and as approved by
the Court.
DATED this 14 day of August, 2003.
This order was docketed August 18, 2003. Irvin’s Notice
of Appeal was filed August 29, 2003, within 30 days of the
entry of this judgment.
Southern Union argues that Irvin was late; the appeal
deadline was August 28, 2003, thirty days from the entry of
the judgment of July 28. Southern Union relies on Federal
Rules of Appellate Procedure (FRAP) 4(a)(4)(A), which
reads as follows:
(4) Effect of a Motion on a Notice of Appeal.
(A) Ifa party timely files in the district court any
if the following motions under the Federal Rules
of Civil Procedure, the time to file an appeal runs
for all parties from the entry of the order disposing
of the last such remaining motion:
(v) for a new trial under Rule 59...
6a
Appendix A
Read literally, the rule applies. The district court on July
28, 2003 entered its order disposing of Irvin’s motion for a
new trial. The appeal period expired August 28, 2003.
We do not believe that the rule was intended to work in
this way. On July 28, 2003, final judgment including the
damages had not yet been entered. What would Irvin have
appealed? In Alice in Wonderland, the rule is “Sentence first
— Verdict afterwards.” We could read our rule to mean
Appeal first, Judgment afterwards. But we are not in
Wonderland. Irvin’s appeal was timely, as was Southern
Union’s, which was filed on September 12, 2003.
Having determined that we do have jurisdiction, we turn
to the merits of the two appeals.
FACTS
James M. Irvin was elected in January, 1997 to be one
of the three commissioners of the Arizona Corporation
Commission (the ACC). This body regulates energy
companies in Arizona and has the power to approve or
disapprove mergers of such companies. Ariz. Rev. Stat.
§ 38-431; Ariz. Const. art. XV, 4-5. Irvin became chairman
in November 1997 and served in this capacity until May 1999.
Jack D. Rose was a lawyer and friend of Irvin and had worked
on Irvin’s campaign for election to the ACC. In June 1997,
Irvin nominated him to be Executive Secretary of the ACC.
Rose served in this capacity until December 31, 1998. Irvin
and Rose became defendants in this case because of their
relationship to the merger deliberations of Southwest Gas
Company (SWG).
7a
Appendix A
On December 14, 1998, SWG announced its agreement
to merge with ONEOK, Inc., an appropriate acronym for One-
Oklahoma, a leading Oklahoma natural gas company. The
price offered by ONEOK was $28.50 per share of SWG stock.
The parties agreed that a competing offer at a higher price
would entitle SWG to consider the higher offer. On February
1, 1999, Southern Union offered SWG $32 per share on terms
otherwise the same. The value of this offer was $108,000,000
over ONEOK’s. If accepted, the deal would have created the
largest natural gas utility in the United States. Any merger
had to be approved by the ACC and by the appropriate
regulatory authorities in California, Missouri, and Nevada.
On February 21, 1999, the SWG board unanimously
determined that Southern Union’s offer was a “Superior
Proposal” as defined in the merger agreement with ONEOK.
That determination meant that Southern Union’s financial
plan was “viable”; that “the deal was doable”; and that
Southern Union could get regulatory approval. SWG was
therefore free to negotiate with Southern Union. Irvin and
Rose, however, worked to defeat Southern Union’s proposal.
On December 28, 1998, Rose, still the Executive
Secretary of the ACC, sent a business proposal to Prudential
Securities, Inc. (PSI), a New York investment house and
wholly owned subsidiary of the Prudential Insurance
Company of America. Rose wrote: “Last week Southwest
Gas Corporation announced that it is being bought out in an
all cash transaction. Given my relationship with this company
and my ability to advise them on important regulatory issues
related to the merger, I believe that I am well positioned to
8a
Appendix A
get some of the underwriting business.” Neither Rose as a
regulator nor PSI as an underwriter seemed aware of the
implications of a regulator touting his ability to obtain
business from a company within his jurisdiction.
On December 31, 1998, Rose resigned as Executive
Secretary. On January 2, 1999, he was hired at the ACC by
Irvin as a “Loaned Executive,” without the knowledge or
approval of other ACC commissioners.
On February 12, 1999, Irvin called Larry Brummett,
chairman of ONEOK, and told him that he didn’t want a
bidding war between ONEOK and Southern Union and that
he wanted to write SWG. A few days later, Rose, with Irvin’s
approval, traveled to Oklahoma and met Brummett.
Brummett agreed that Rose could set up a meeting between
representatives of PSI and GNEOK. February 23, 1999, the
day after Southern Union’s offer became public, Rose called
PSI and told them that he was advising the chairman of
ONEOK on the proposed merger and would arrange for PSI
people to meet the CEO and CFO of ONEOK. On March 2,
1999, Rose met with John Gaberino, general counsel of
ONEOK. The next day, Gaberino and Rose met with Irvin,
who told Gaberino that Rose had given him a good report on
ONEOK and that Irvin intended to contact the other two
relevant regulatory bodies, the California Public Utilities
Commission (the CPUC) and the Public Utilities
Commission of Nevada (the PUCN). Two days later, March
5, 1999, Gaberino and another lawyer for ONEOK worked
on a letter for Irvin to send to the board of SWG. Gaberino
went over the text of this letter with Rose. This letter (the
9a
Appendix A
Rose-Irvin letter) was to become an instrument in Irvin’s
interference with the proposed Southern Union merger.
On March 9, 1999, J. David Dubin of PSI sent an email
to Joseph Sebastian Fichera, a managing director of the same
company. This communication was titled “Referral Business
Opportunity Through Jack Rose.” Referring to Rose, Dubin
stated:
3. Jack says that the Company’s CEO has a strong
motive for wanting to reward him presumably for
his work in helping the Company obtain favorable
regulatory action from the ACC during his tenure
as its chief executive. He would like to pursue
the Transaction on behalf of PSI and is confident
that he can persuade the Company to name PSI as
a managing underwriter.
4. Jack is concerned, however, about using up his
goodwill with the CEO to obtain an engagement
in which the fee income to IBG [= Investment
Banking Group or underwriter] will be modest in
comparison to the fees IBG would collect (and
that he in turn would share) as an advisor on an
acquisition. Hence, Jack has proposed that he and
PSI enter into a finder’s fee arrangement under
which his contingent payout would be larger if he
can deliver a more lucrative appointment for PSI.
Specifically, he would propose the following
percentage payouts of the fee income booked by
IBG on the Transactions:
10a
Appendix A
A. For appointment
as a Co-Manager. 15% of IBG fee income
B. For appointment
as a Senior Manager 33% of IBG fee income
C. For appointment
as Sole Manager 40% of IBG fee income.
6. Time is of the essence. Jack’s telephone in
Phoenix is 602-906-9007.
On March 10, 1999, Fichera passed this information on
to another executive at PSI:
A person we met on the Administrative
Securitization trail in Arizona says he can help
deliver a significant piece of business to us. The
client, he told us today, is Oneok, a major
midwestern gas company (Carol Coale does not
cover them though she tracks them). We do not
have arelationship with this firm (last WARP call
date 5/95 from someone no longer here). It is an
A rated company and someone we would like to
do business with. He is willing to work completely
onthe come___no deliver, no pay. But, if he does
deliver, he wants to be paid big time (see below).
I think this is worth pursuing _itisreal____ but
need your guidance as to how much to compensate
lla
Appendix A
if he really can deliver a senior managed or sole
managed deal.
We need to get back to him on Thursday AM.
On March 19, 1999, Fichera, on behalf of Prudential
Securities, and Rose entered into a contract providing as
follows:
Dear Jack:
This letter is to confirm our mutual understanding
with respect to compensation that may be payable
to you from Prudential Securities Incorporated
(“PSI”) with respect to certain public offerings of
securities underwritten by PSI.
You agree to introduce PSI to ONEOK, Inc. and
U.S. West (each a “Company’”) and to assist PSI
in securing the engagement of PSI by each
Company (collectively, the “Introduction”). If
during the next 24 months either Company
consummates a public offering of its securities in
which PSI acts as a managing underwriter (a “PSI
Underwritten Offering”), PSI will pay to you a
fee (the “Fee”) based on a percentage of the
management fee paid to PSI with respect to such
12a
Appendix A
PSI Underwritten Offering according to the
following schedule:
Capacity of PSI Percentage of Management Fee
Co-Manager 15%
Lead Manager or Co-Lead Manager 30%
Sole Manager 35%
The Fee shall be paid to you within 30 days of the receipt
of the management fee by PSI, provided that such Fee is not
prohibited by law. PSI will only be obligated to pay you a
Fee hereunder when the entire fee payable to PSI with respect
to a PSI Underwritten Offering has been received by PSI
free of adverse claim.
PSI shall reimburse you periodically for your reasonable,
out-of-pocket travel and lodging expenses incurred with PSI’s
prior consent in connection with the Introduction.
Although only the proposed merger of ONEOK and U.S.
West was referred to, this agreement, it could be inferred,
was also to govern an ONEOK merger with SWG. A series
of telephone calls between Rose and Irvin punctuated Rose’s
negotiations with PSI.
Rose and Irvin were at work even before Rose’s contract
was signed. In a memo dated March 16, Mark Dioguardi, a
lawyer for ONEOK, had noted: ‘ Letter from one or more
Chair would sink [Southern Union].” On that date, Irvin and
13a
Appendix A
Rose were in San Francisco. Their trip was unknown to the
ACC, and their expenses were not chargec to it. In San
Francisco they met with members and staff of the CPUC.
According to Harvey Morris, who attended the meeting as
counsel for the CPUC, Irvin and Rose together conducted a
lobbying campaign for ONEOK. They presented the Rose-
Irvin letter criticizing a SWG—Southern Union merger,
stated that Southern Union would have to issue junk bonds
to finance the merger, and added that Southern Union’s debt-
equity ratio would become 80-20. The meeting began and
ended with Irvin and Rose urging the CPUC to send the Rose-
Irvin letter to SWG. Everything said about Southern Union
by the two Arizonans was negative.
On March 23, 1999, Irvin and Rose traveled to Reno,
Nevada and the following day met with Judy Sheldrew, the
chair of the PUCN. Irvin introduced Rose to talk about the
SWG merger proposals. Rose told her that ONEOK was by
far the superior candidate. Irvin urged her to have the Nevada
commission issue the Rose-Irvin letter to SWG that he had
urged upon the CPUC.
On March 25, 1999, Irvin and Rose met with Kenneth
Guinn, the governor of Nevada and a former chairman of
SWG. They urged him, too, to send a negative letter to SWG
regarding Southern Union’s offer. Governor Guinn declined
to do so but, instead, called the CEO of SWG and advised
him to “read between the lines” of the letter he would receive
from Irvin. The Rose-Irvin letter was faxed to SWG by Irvin
on April 5, 1999 from his office at the ACC. It was signed by
him alone.
14a
Appendix A
April 5 was the same day the SWG board was to meet to
discuss the competing merger offers. After faxing his letter,
Irvin moved to Rose’s home and from there called the CEO
of SWG. Irvin told him that it was highly unlikely that a
SWG-Southern Union merger would be approved by the ACC
and that the California commission was equally concerned
about that proposal. This telephone cai! was tape-recorded
and played to the board of SWG. Copies of the Rose-Irvin
letter were distributed to the board. Members of the board
saw the regulators’ position as a big problem in the way of
accepting Southern Union’s higher offer.
On April 12, 1999, Fichera of PSI and Rose met with
officials of ONEOK, who indicated their readiness to do
business with PSI. Thereafter Rose sent PSI an amendment
to their agreement of March 19, 1999. Whereas the split of
“any customary M&A advisory fee” on the ONEOK-U:S.
West merger gave only 35% to Rose, the amendment
proposed the split of the advisory fee on an ONEOK-SWG
merger in this way: “2/3rds to Rose and 1/3rd to Prudential
up to $3 million and 80% to Rose and 20% to Prudential for
any fees in excess of $3 million.” Rose’s proposal was
formally accepted by PSI in a contract signed by Fichera and
dated June 22, 1999.
On April 26, 1999, SWG announced that it had rejected
Southern Union’s offer. The press release of SWG announced
that its board “believes that Southern Union would have a
more protracted and difficult time in obtaining regulatory
approvals, extending eighteen months or longer.” SWG went
ahead with ONEOK.
15a
Appendix A
Rose guided ONEOK through the regulatory process and
was congratulated by ONEOK for his help. ONEOK prepared
a $ 300 million debt offering to finance the merger with SWG.
PSI was to be a manager of the underwriting. Rose, however,
did not collect his commission. Shortly after Southern Union
filed its complaint in this case in July 1999, ONEOK canceled
the offering. After Southern Union had conducted discovery
in this case and in the course of it gained knowledge of PSI’s
agreement with Rose on the fees he would earn, ONEOK
withdrew entirely from the merger.
PROCEEDINGS
On July 19, 1999, Southern Union filed its complaint in
this case. Its second amended complaint, filed July 25, 2000,
was the operative basis of the trial. Before trial, on December
15, 2000, the district court dismissed the RICO claims on
the ground that they constituted a securities fraud claim and
were therefore barred by the Private Securities Litigation
Reform Act of 1995, 18 U.S.C. § 1964(c).
In 2001, the multiple defendants moved for summary
judgment. On January 4, 2002, the district court entered a
comprehensive order disposing of these motions. We note
the relevant rulings. (1) Granted was a motion to deny
Southern Union the right to present a jury with evidence of
its lost profits. (2) Denied was a motion for summary
judgment by Jack Rose. The court observed that Rose had
invoked his privilege against self-incrimination as to the
matters at issue and that his invocation of the privilege in a
civil suit left the fact-finders free to draw adverse inferences
against him. (3) Denied was a motion for summary judgment
l6a
Appendix A
by ONEOK, the court ruling that “ONEOK’s characterization
of the evidentiary record is demonstrably false.” After
discovery and various motions, on October 29, 2002, a jury
of nine was selected, sworn, and empaneled.
Prior to trial, an incident occurred that made a sharp
impression on the district court and is best presented in the
judge’s own words as she reviewed Irvin’s post-trial motion
for remittitur: Irvin participated in a “scheme to impede the
jury’s search for truth at trial.” The scheme involved his wife,
Carol, fabricating notes of a telephone call of July 31, 1999,
between herself and Jack Rose; in the conversation Rose
appeared to exculpate Irvin from any charge of wrongdoing.
Irvin gave the notes to his counsel, who presented them to
the court. When counsel for Southern Union obtained the
opportunity for its forensic examiner to inspect the notes,
Irvin’s counsel admitted that the notes were not
contemporaneous with the telephone call but had just recently
been written; he withdrew his proffer of the notes. Southern
Union then moved to admit the notes as evidence of Irvin’s
intentional fabrication of evidence. The court granted the
motion.
After nearly two months of trial, the jury returned its
verdict. The subsequent proceedings and the appeals have
already been noted.
ANALYSIS
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
17a
Appendix A
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’! Hosp.,
147 Ariz. 370, 710 P.2d 1025, 1041 (Ariz. 1985)).
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
against the employee in his public capacity and is directed
to cases niaking claims against the employee’s public
employer. /d.
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
18a
Appendix A
defendant was acting within the course and scope
of his employment 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 dismiss. 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., 186 Ariz. 351, 922 P.2d 316, 318 (Ariz.
Ct. App. 1996).
A 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. Although the district court ruled
that Irvin was not at all entitled to an instruction derived
from Crum, the course and scope instruction that Irvin
proposed was deficient under Arizona law and could have
still been rejected. Despite this court’s hoiding on the course
and scope instruction, 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,
19a
Appendix A
was that Irvin’s acts were connected with his official duties
only as much as a judge accepting 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, 122 S. Ct. 1609, 152 L. Ed. 2d 623
(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, 120 S. Ct. 936, 145 L. Ed. 2d 814 (2000).
Moreover the jury was instructed in detail about the scope
of the ACC’s authority and the duties inhering therein, and
the jury nevertheless concluded that Irvin had acted
improperly.
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, 123 S. Ct. 1513, 155 L. Ed.
2d 585 (2003).
No bright line has been set beyond which punitives may
not go. /d. at 425, 123 S.Ct. 1513. But we have been reminded
that, under established principles, few awards exceeding a
single digit ratio to a significant degree “will satisfy due
process.” /d. Even an award more than four times the amount
of compensatory damages “might be close to the line of
constitutional impropriety.” /d. History points to double,
20a
Appendix A
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.
“*The most important indicium of the reasonableness of
a punitive damages award is the degree of reprehensibility
of the defendant’s conduct.’” Jd. at 419 (quoting BMW of
North America, Inc. v. Gore, 517 U.S. 559, 575, 116 S. Ct.
1589, 134 L. Ed. 2d 809 (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
utilit.’ company, ONEOK, and his personal interests... .”
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:
2la
Appendix A
“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, 133 Ariz. 500, 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.
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, 69 L. Ed. 2d 616, 101 S. Ct. 2748 (1981). The
22a
Appendix A
district court held that the single digit ratio was not the right
measure from harm by a public official abusing his trust.
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 ".3d
1020, 1043 (9th Cir. 2003), cert. denied, 541 U.S. 902, 124
S. Ct. 1602, 158 L. Ed. 2d 244 (2004). We do not believe
that the civil rights case ratios apply to a case brought as a
private tort action.
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.
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,
23a
Appendix A
Irvin 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.
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 triai on the punitives. We leave to the discretion of the
district court the ratio to be set if it orders remittitur.
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.
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.
24a
Appendix A
03-16649—Affirmed in part, vacated in part, and
remanded.
03-16729-—A ffirmed.
FERNANDEZ, Circuit Judge, Concurring and
Dissenting:
I dissent in part because I believe that a new trial is
required, although, as I will note, I also concur in part because
] do agree with certain portions of the majority opinion.
A. Jurisdiction
I do agree with the majority’s pithy opinion that we have
jurisdiction over this appeal and that a contrary rule would
approach parody. Still and all, at the risk of being unduly
prolix, I will say a few more words about my reasons for
agreeing on this issue.
The problem we are faced with is the plain language of
Fed. R. App. P. 4. While it is usually thought that a party’s
time to file a notice to appeal does not start to run until a
judgment is filed, the rule itself does not say so on its face.
Its plain language states that the time starts to run upon the
entry of the judgment appealed from except as provided in
25a
Appendix A
Rule 4(a)(4). See Rule 4(a)(1)(A). But Rule 4(a)(4)(A) says
that the time runs from the date that certain posttrial motions
are decided (entry of an order disposing of them). The plain
language suggests that even if no judgment has been entered,
the time starts to run when the motions are decided. Like the
majority, I do not think that reading can be accepted. Why?
Pursuant to 28 U.S.C. § 1291, our jurisdiction extends
to final decisions only. Thus, until there is a final decision,
we cannot take jurisdiction over a case. But a party cannot
have a final decision to appeal from until one is entered.
(True, a party might file a notice of appeal earlier, but it is
not effective. It is simply saved under Rule 4(a)(2)). Thus,
the plain reading would lead to the possibility that pursuant
to Rule 4(a)(4)(A) the time to file a notice to appeal would
run out before there was a final judgment over which we
could take jurisdiction.' That seems peculiar, not to mention
unjust. See Clinton v. City of N.Y., 524 U.S. 417, 428-29,
118 S. Ct. 2091, 2098, 141 L. Ed. 2d 393 (1998); Pub. Citizen
v. United States Dep t of Justice, 491 U.S. 440, 452-55, 109
S. Ct. 2558, 2566-67, 105 L. Ed. 2d 377 (1989); Green v.
Bock Laundry Mach. Co., 490 U.S. 504, 527-28, 109 S. Ct.
1981, 1994-95, 104 L. Ed. 2d 557 (1989) (Scalia, J.,
concurring); Or. Natural Res. Council, Inc. v. Kantor, 99 F.3d
334, 339 (9th Cir. 1996). Similarly, if Southern Union were
correct, the time for a notice to appeal would begin to run
before there was a final judgment (final decision) from which
an appeal to us could actually be taken. Thus, we cannot rely
on the plain language alone.
1. In general, a judgment is the equivalent of a final decision.
See Bankers Trust Co. v. Mallis, 435 U.S. 381, 384 n.4, 98 S. Ct.
£117, 1119 n. 4, 55 L. Ed. 2d 357 (1978).
26a
Appendix A
If we resort to common sense, that tells us that the idea
of being forced to appeal a judgment before there is a
judgment to appeal is rather incoherent. That would suggest
that the possibility was never considered and that Rule 4(a)(4)
was designed to extend, not limit, the appeal time set forth
in Rule 4(a)(1). Not surprisingly, if we resort to the Advisory
Committee notes, we can divine that they speak to the idea
of postponing the notice of appeal while the motions in
question are pending and mandate that one should await the
decision of those. See Rule 4, Advisory Comm. Notes (1979
Amendment, Subdivision (a)(4)). They also look upon Rule
4(a)(4)(A) as tolling the running of or extending the time to
appeal. See id. (1993 Amendment, Note to Paragraphs (a)(1),
(a)(4)).
It must be acknowledged on the other hand that Rule
4(b), which deals with criminal appeals, explicitly addresses
the possibility that a judgment might be filed after certain
motions are disposed of and then proceeds to declare that
the time runs from the entry of the decision on the motions
or entry of the judgment, whichever is later. Rule 4(b)(3).
That suggests that the Rules Committee knew how to deal
with the problem we face here, if it thought about it and
waited to do so. But, again, the Committee Notes regarding
that provision indicate a concern that because of the unique
structure of the criminal rules, the motions might actually
be decided before a judgment was entered. The Committee
wanted to avoid the absurdity of having the notice to appeal
time run before entry of the judgment. See Rule 4, Advisory
Comm. Notes (1993 Amendment, Note to Subdivision (b)).
That rather underscores the fact that the issue was never even
contemplated for a civil case like ours. In fact, the Committee
27a
Appendix A
stated that the problem in the criminal area was that, unlike
a civil case, the time to make a motion could start running
before there was an entry of judgment. /d. The rule responded
to the mention of that difficulty in an earlier case. See United
States v. Hashagen, 816 F.2d 899, 902 n.5 (3d Cir. 1987).
Unfortunately, nobody had noted the problem for civil cases;
nobody even contemplated it.
All of the above being so, | agree with the majority on
the jurisdiction issue.
B. Merits
I also agree with the majority that there was sufficient
evidence from which a jury could hold in favor of Southern
Union. Much of that is detailed in the majority opinion.
Where we part company is on the question of whether the
verdict can be upheld in light of the district court’s failure
and refusal to give the scope of employment instruction
requested by Irvin.
In my view, Southern Union’s failure to give the notice
required under Arizona Revised Statutes § 12-821.01(A)
would be fatal to its case, if Irvin was, indeed, acting within
the scope of his employment. Crum v. Superior Court, 186
Ariz. 351, 922 P.2d 316 (Ariz. Ct. App. 1996), makes that
clear. As Crum puts it: “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.” /d. at 318.
28a
Appendix A
If a plaintiff for some reason decides not to protect itself
by filing an appropriate notice, that is fine, but the plaintiff
then proceeds at its own peril if, as it turns out, the state
officer or employee in question was acting within the scope
of his employment. In that instance, the plaintiff’s gamble is
indeed parlous because it is not even necessary that the
employee have acted from motives which are entirely and
purely public service oriented, as long as at least a part of
the employee’s purpose was to serve his master’s needs and
ends. See Smith v. Am. Express Travel Related Servs. Co.,
Inc., 179 Ariz. 131, 876 P.2d 1166, 1170-71 (Ariz. Ct. App.
1994).
That said, Irvin was surely entitled to have a jury consider
whether his actions were within the scope of his employment;
if they were, due to Southern Union’s failure to give the
required statutory notice, a judgment could not have been
rendered against him. Thus, the district court did err, but
was the error prejudicial? See Jenkins v. Union Pac. R.R.
Co., 22 F.3d 206, 210 (9th Cir. 1994). I think it was. In my
view, we Cannot say that it is more probabie than not that the
error was harmless. /d.
No doubt there was evidence from which the jury could
decide that Irvin was entirely outside the scope of his
employment, but there was contrary evidence also. Irvin held
an important elected position as a commissicner of the
Arizona Corporations Commission, which regulates energy
companies in Arizona, among other things.
The Commission and its members are vested with very
broad authority in their quest to benefit the public weal. In
29a
Appendix A
fact, the scope of the Commission’s power and authority is
so extensive that it has sometimes been dubbed the fourth
branch of the government of Arizona. See Ariz. Corp.
Comm'n v. Superior Court, 105 Ariz. 56, 459 P.2d 489, 493
(Ariz. 1969). As to public service corporations, those powers
include the setting of rates, the issuing of rules and
regulations, the inspection of books and records, the receipt
of reports, the conduct of investigations, and even the
imposition of fines. See Ariz. Const. art. XV, §§ 3, 4, 13, 19;
see also Ariz. Rev. Stat. § 40-202; Ariz. Corp. Comm'n v.
State ex rel. Woods, 171 Ariz. 286, 830 P.2d 807, 811-15
(Ariz. 1992) (detailing the provenance and history of the
Commission and its power). And there can be no doubt that
investigative authority, including the taking of evidence under
oath, is conferred upon “each commissioner.” Ariz. Rev. Stat.
§ 40-241.
In this case, the jury had evidence before it from which
it could have determined that Irvin’s actions, though
misguided, were designed to further the interests of the
Commission and of the State. He testified that, as he saw it,
the Constitution gave him investigative powers, as it surely
did. He also stated that he saw no reason why he should not
share his concerns with others. His position was not simply
to act as a judge; he was an investigator, an elected public
official in high office, and a person who could be expected
to be much more active than judges are. Furthermore, it is
apparent that Irvin, rightly or wrongly, saw Southern Union
as a rather undesirable company which, due to its capital
structure and history, would no doubt try to save money by
terminating many current employees of Southwest Gas and
by degrading customer service. He was of the opinion that
30a
Appendix A
the company had done something like that in another state.
Moreover, there was evidence that others had the same view.
In addition, in Irvin’s opinion, and there is nothing to
the contrary, it was proper for an Arizona commissioner to
speak to his counterparts (and others) in other affected states
and to try to develop what he thought of as a regional
approach to regulatory problems. It is not surprising that he
advocated his view of the matter when he did so. Finally,
while one can be cynical about Irvin’s motivations,’ he
expressly testified that he was never promised anything of
value for his activities. There is absolutely no evidence that
he was.
Let me be clear. I do not intend this opinion to be an
elogium; I do not say that Irvin’s behavior deserves
encomiums, but, whatever his failings, the evidence does not
require the conclusion that he is a rapscallion. It should not
come as a surprise to discover that a government official
thought he was fulfilling the demands (or purposes) of his
office when he behaved in a distasteful manner. If Irvin
thought he was fulfilling the purposes of his position and
acted for that reason, he surely would not be the first
governmental official, even in recent times, who thought he
was acting to benefit the public but did so in ways that were
unacceptable, improper, and even frightening. | will leave
examples of the always renascent challenges to good
government in a truly free society to the memory, knowledge
and intelligence of the reader.
2. Can anybody trust a person who attempts to conceal,
manufacture, and manipulate evidence after a lawsuit starts?
3la
Appendix A
In fine, under Arizona law at least, the evidence does
not necessarily, or even particularly, show that Irvin was
outside the scope of his employment when he took the actions
in question here. More specifically, a jury could find that he
was very misguided, but was still acting to further the
interests and purposes of his employer.’ The failure to give
the jury an opportunity to so decide was prejudicial error.
Did Irvin behave as he should? Of course not; the jury
has told us that. Was Irvin’s conduct bad enough to deserve
punishment? Of course; the jury has told us that also. But
was Irvin actually flagitious? We do not know; the jury was
noi asked to decide that question. I would reverse and remand
for a new trial.*
Thus, I respectfully concur in part and dissent in part.
3. In fact, under 42 U.S.C. § 1983, we often encounter a public
officer who is acting within the scope of his employment and who
has violated another person's sacred constitutional rights knowingly
or by plain incompetence. See Anderson v. Creighton, 483 U.S. 635,
638, 107 S. Ct. 3034, 3038, 97 L. Ed. 2d 523 (1987); see also Saucier
v. Katz, 533 U.S. 194, 201-02, 121 S. Ct. 2151, 2156, 150 L. Ed. 2d
272 (2001).
4. | agree with the majority’s conclusion that the punitive
damage award cannot stand, although, again, if Irvin was acting
within the scope of his employment, no award whatsoever would be
justified.
32a
APPENDIX B — ORDER OF THE UNITED STATES
DISTRICT COURT FOR THE DISTRICT OF ARIZONA
ENTERED JULY 28, 2003
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF ARIZONA
SOUTHERN UNION COMPANY,
a Delaware corporation,
Plaintiff,
v.
SOUTHWEST GAS CORPORATION,
a California corporation, et al.,
£ — Defendants.
CV-99-1294-PHX-ROS
July 25, 2003, Dated
July 28, 2003, Entered
~~~ ORDER
Pending before Court is Defendant Irvin’s Amended
Motion for JNOV or in the Alternative for New Trial or
Remittitur [Doc. #2238]. The Court has reviewed the
briefing, and will deny the motion. A written opinion will
follow early next week.
Accordingly,
IT IS ORDERED that Defendant Irvin’s Amended
Motion for JNOV or in the Alternative for New Trial or
Remittitur [Doc. #2238] is DENIED.
33a
Appendix B
DATED this 25 day of July, 2003.
s/ Roslyn O. Silver
Roslyn O. Silver
United States District Judge
34a
APPENDIX C — OPINION OF THE UNITED STATES
DISTRICT COURT FOR THE DISTRICT OF ARIZONA
ENTERED AUGUST 1, 2003
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF ARIZONA
281 F. Supp. 2d 1090
SOUTHERN UNION COMPANY,
a Delaware corporation,
Plaintiff,
v.
SOUTHWEST GAS CORPORATION,
a California corporation, et al.,
Defendants.
CV-99-1294-PHX-ROS
July 31, 2003, Decided
August 1, 2003, Entered
OPINION
SILVER, District Judge.
On December 18, 2002, after a jury trial of nearly two
months, the jury returned a verdict for Plaintiff Southern
Union Company against Arizona Corporation Commissioner
James Irvin, the only remaining Defendant at the conclusion
of trial, and assessed a punitive damages award of
$60,000,000. Southern Union prevailed on two causes of
35a
Appendix C
action, intentional interference with business expectancy and
intentional interference with contractual relations, both
arising from Irvin’s activities generally in 1999 which caused
the failure of an attempted merger between Southern Union
and Southwest Gas Corporation. At the time of both the
attempted merger and the jury verdict, Irvin held elective
office as a Commissioner on the Arizona Corporation
Commission. He has filed an Amended Motion for JNOV or
in the Alternative for New Trial or Remittitur [Doc. # 2238],
seeking a new trial or remittitur on the punitive damage award
of $60,000,000.
Following the Supreme Court’s decision in State Farm
Mutual Auto. Ins. Co. v. Campbell, 538 U.S. 408, 123 S.Ct.
1513, 155 L.Ed.2d 585 (2003) (Campbell), the parties
submitted supplemental briefing on the issue of punitive
damages: Commissioner Irvin’s Supplemental Memorandum
of Law [Doc. # 2244], Southern Union Company’s Response
{[Doc. # 2245], and Commissioner Irvin’s Reply [Doc.
# 2246]. Following a hearing on June 2, 2003, the Court
ordered further supplemental briefing, and both Southern
Union [Doc. # 2253] and Commissioner Irvin [Doc. # 2254]
submitted additional memoranda. Having considered the
briefing of the parties, Commissioner Irvin’s motion will be
denied, and the punitive damages award of $60,000,000
assessed by the jury will be upheld.
36a
Appendix C
Analysis
A. Punitive Damages under Arizona Law
Commissioner Irvin’s initial argument is that there is
insufficient evidence to sustain an award of punitive damages
under Arizona law. “To recover punitive damages, the
plaintiff must .. . introduce sufficient evidence to allow the
trier-of-fact to calculate a punitive damage award that is
reasonable under the circumstances.” Hawkins v. Allstate Ins
Co., 152 Ariz. 490, 497, 733 P.2d 1073, 1080 (Ariz.1987).
Hawkins specifies three non-exclusive factors that the Court
should consider in evaluating an award of punitive damages:
the financial position of the defendant, the nature of the
defendant’s conduct, and the profitability of the defendant’s
conduct. /d. at 501-2, 733 P.2d 1073. See also Hyatt Regency
Phoenix Hotel Co. v. Winston & Strawn, 184 Ariz. 120, 134,
907 P.2d 506, 520 (Ariz.App.1995) (outlining and applying
three Hawkins factors). “A plaintiff is not required to put on
proof of every factor, nor is any single factor a prerequisite
to recovery of punitive damages. Rather, the plaintiff must
produce evidence so that the amount awarded may not be
said to be so unreasonable in regard to the circumstances as
to show the influence of passion or prejudice.” Hawkins, 152
Ariz. at 501, 733 P.2d 1073 (quotations and citations
omitted). The Court must show considerable deference to
the judgment of the jury:
We vest the trier-of-fact with discretion to award
an amount of punitive damages that, in its
judgment, will punish the defendant and serve as
an example to deter similar future misconduct.
37a
Appendix C
Once exercised, this discretion should not be
disturbed unless the award is the result of passion
or prejudice. The appropriate test of passion or
prejudice is whether the verdict is so manifestly
unfair. unreasonable, and outrageous as to shock
the conscience of the court. The amount of the
award alone is not sufficient evidence to prove
the jury acted with passion or prejudice.
Hawkins, 152 Ariz. at 501, 733 P.2d 1073 (quotations and
citations Omitted) (emphasis added).
The first consideration is the financial position of the
defendant. Hawkins, 152 Ariz. at 497, 733 P.2d 1073. “It is
axiomatic that the wealthier the wrongdoing defendant, the
greater the award of punitive damages necessary to punish
him. We recognize, however, that the award must not
financially kill the defendant.” Jd. at 501, 733 P.2d 1073.
Irvin argues that the punitive damages award in this case
must be overturned because it would “financially kill” him
based on the evidence that Southern Union introduced at trial.
At trial, Southern Union produced evidence of one financial
statement of Irvin’s and his wife’s assets (Exhibit 435) which
reflected that on an undisclosed date they had $859,000 in
assets, excluding Irvin’s interests in his family’s business.
Tr. at 4770-71. On cross-examination, Irvin conceded that
he had stock in the family business but claimed to have no
knowledge of how much the stock or the company was worth.
Tr. at 4762. Later, Irvin claimed, without any offer of
proof or substantiation, that his individual net worth was
“considerably less” than that reflected on the joint financial
statement. Tr. at 4821.
38a
Appendix C .-
Southern Union, however, presents case law establishing
that the burden is on Irvin to show that the verdict would
~ actually financially destroy him. In Arizona, “there is no
requirement that specific financial circumstances be
presented. A defendant whc has not introduced evidence of
his financial circumstances many not complain of its
absence.” Asphalt Engineers, Inc. v. Galusha, 160 Ariz. 134,
138, 770 P.2d 1180, 1184 (Ariz.App.1989). See also
Nienstedt v. Wetzel, 133 Ariz. 348, 357, 651 P.2d 876, 885
(1982) (holding that “a defendant may not complain of the
absence of evidence of his wealth when he has made no effort
to introduce such evidence”); Hawkins, 152 Ariz. at 501, 733
P.2d 1073 (“A plaintiff is not required to put on proof of
every factor, nor is any single factor a prerequisite to recovery
of punitive damages. See Nienstedt v. Wetzel, 133 Ariz. at
357, 651 P.2d at 885 (evidence of “efendant’s wealth not
required to recover punitive damages).”) (citation in original).
Further, Arizona courts have held that “the sole fact that an
award exceeds a defendant’s present assets” is not sufficient
grounds for setting it aside. Puz v. McDonald, 140 Ariz. 77,
79, 680 P.2d 213, 215 (Ariz.App. 1984).
Irvin presented no evidence that the award would actually
financially destroy him. The only eviderce of his net worth
in the record was offered by Southern Union. Irvin disputed
the amount by merely testifying that the evidence was not
accurate. Without corroboration of this sta?zment and other
evidence, Irvin has waived his right to <omplain of his
absence of wealth.
The second consideration in assessing the award of
punitive damages is “the nature of the defendant’s conduct,
39a
Appendix C
including the reprehensibility of the conduct and the severity
of the harm likely to result, as well as the harm that has
occurred, from the defendant’s conduct.” Hawkins, 152 Ariz.
at 497, 733 P.2d 1073. More particularly, “[t]he more
reprehensible the act and the more severe the resulting harm,
the greater the award of punitive damages that is reasonable
under the circumstances. The duration of the misconduct,
the degree of defendant’s awareness of the harm or risk of
harm, and any concealment of it are elements to consider in
judging the reprehensibility of the defendant’s conduct.”
Id. at 497, 733 P.2d 1073.
Irvin argues that his conduct was not reprehensible,
because it took place over a short period of time (two months)
and resulted in only economic injuries. Further, Irvin argues
that any concealment of his activities should not be
considered because the concealment itself was not the
proximate cause of the injury. Irvin’s first objection is
meritless, because Southern Union presented evidence at trial
of a determined effort, over a number of months, to disrupt
the Southern Union-Southwest Gas merger. The evidence also
showed that during this time, Irvin abused his privileges as
a Corporation Commissioner to attempt to disrupt the deal,
while purposely concealing his activities from the
Commission. Additionally, Irvin was acutely aware of the
risk of harm to Southern Union, a fact which the jury clearly
found in order to find him liable of an intentional tort and
award an impressive amount of punitive damages. Southern
Union accurately argues that this type of conduct should be
severely deterred, which is a key purpose of an award of
punitive damages. Finally, the concealment is also an
“element[ ] to consider in judging the reprehensibility of
[Irvin’s] conduct.” Hawkins, 152 Ariz. at 497, 733 P.2d 1073.
40a
Appendix C
Irvin’s concealment is relevant to determining the degree
of reprehensibility. Irvin relies on Saucedo v. Salvation Army,
200 Ariz. 179, 24 P.3d 1274 (Ariz.App.2001), in which the
Court of Appeals overturned an award of punitive damages
where the requisite evil mind was inferred from a motorists’
flight from the scene of an accident after he negligently struck
and killed a pedestrian. The Court held that the flight was
not the proximate cause of the injury, and therefore was not
a basis for punitive damages. However, in Saucedo, the flight
had very little relevance to whether the motorist committed
the tort with an evil mind because it occurred after the tort
was completed, and the flight did not proximately cause the -
injury because the victim would have died whether or not
the motorist had stopped. In this case, the evidence of
concealment clearly bears upon whether Irvin had the
required mental state of intent to commit the tortious acts.
Further, it directly relates to Irvin’s ability to undercut the
merger while avoiding any public scrutiny anticipated in his
role as a public official with significant authority to affect
the decision of which company merged with Southwest Gas.
The concealment was part of Irvin’s pattern of activities
constituting the legal “proximate cause” of the injury. The
jury was instructed on proximate cause in accordance with
Arizona law. Instruction No. 28 [Doc. # 2196] reads, “Before
you can find James Irvin at fault, you must find that his
conduct was the cause of Southern Union’s injury. To find
that James Irvin’s conduct caused Southern Union’s injury,
Southern Union must prove that Southwest Gas Corporation
would not have breached its contract with Southern Union,
and/or terminated Southern Union’s business expectancy in
acquiring Southwest Gas, but for the conduct of James Irvin.”
By virtue of the verdict, the jury found Irvin’s conduct was
the proximate cause of both torts.
4la
Appendix C
The final Hawkins factor, the profitability of Irvin’s
conduct to himself, is not relevant here. There was evidence,
however, that he would have been personally advantaged by
a merger with ONEOK. First, there was reliable evidence
that the management of Southwest Gas preferred ONEOK
aS a merger partner over Southern Union. Further, the
evidence supported the inference that Irvin perceived that
his allegiance to the management of Southwest Gas would
enhance his political career. Apart from this, it is not
necessary, to support an award of punitive damages, that
Southern Union prove that Irvin personally profited from his
tortious actions. Hawkins, 152 Ariz. at 501, 733 P.2d 1073.
Therefore, the award of punitive damages is not in violation
of or inconsistent with Arizona law.
B. Due Process
Foliowing recent Supreme Court precedents, the Court
must determine whether the punitive damages award is
constitutional as a matter of due process. In 1996, the
Supreme Court decided BMW of North America, Inc. v. Gore,
517 U.S. 559, 568, 116 S.Ct. 1589, 134 L.Ed.2d 809 (1996)
(Gore), which established that punitive damage awards may
be so “grossly excessive” as to “enter the zone of arbitrariness
that violates the Due Process Clause of the Fourteenth
Amendment.” In Campbell, 538 U.S. at__ - __, 123 S.Ct. at
1520-21, the Supreme Court held unconstitutional a $145
million punitive damages award based on a compensatory
damage award of $1 million. In doing so the Court reaffirmed
that trial courts must consider the three central “guideposts”
first specified in Gore: the degree of reprehensibility of the
defendant’s misconduct, the disparity between actual or
42a
Appendix C
potential harm suffered by the plaintiff and the punitive
damages award, and the difference between punitive damages
and civil or criminal penalties authorized or imposed in
comparable cases. To determine whether the $60 million
award is unconstitutionally excessive, the Court must
examine each guidepost.
(1) Degree of reprehensibility
“(T]he most important indicium of the reasonableness
of a punitive damages award is the degree of reprehensibility
of the defendant’s conduct.” Campbeli, 538 U.S. at __, 123
S.Ct. at 1521 (quoting Gore, 517 U.S. at 575, 116 S.Ct. 1589).
The Court in Campbell listed five factors to consider in
determining the reprehensibility of a defendant’s conduct:
“the harm caused was physical rather than economic, the
tortious conduct evinced an indifference to or a reckless
disregard of the health or safety of others; the target of the
conduct had financial vulnerability; the conduct involved
repeated actions or was an isolated incident; and the harm
was the result of intentional malice, trickery, or deceit, or
mere accident.” Campbell, 538 U.S. at__, 123 S.Ct. at 1521.
The Court clarified that “[t)}he existence of any one of these
factors weighing in favor of a plaintiff may not be sufficient
to sustain a punitive damages award; and the absence of all
of them renders any award suspect.” /d. at 1521.
In this case, the degree of reprehensibility of Irvin’s
conduct is marked by two factors: repeated actions and harm
caused by intentional trickery and deceit. As discussed in
the previous section, Irvin’s tortious actions were planned
and perpetrated over a number of months, and were not
43a
Appendix C
singular or isolated attempts to disrupt the merger, even if
the rejection of the merger occurred at only one Board
meeting. Also, the harm was the result of Irvin’s intentional
conduct, which the jury determined was accomplished with
an evil mind, manifested by deception and trickery. Irvin was
in a vital position to influence the Southwest Gas Board of
Directors on which company would merge with Southwest
Gas. As established at trial Irvin, as a Corporation
Commissioner, had quasi-judicial responsibilities, requiring
scrupulous honesty and neutrality in his dealings with all
merger candidates, and in his serving the best interests of
the public. “To be sure, infliction of economic injury,
especially when done intentionally through affirmative acts
of misconduct... can warrant a substantial penalty.” Gore,
517 U.S. at 576, 116 S.Ct. 1589. Though striking down a
punitive damages award, the Court in Gore was careful to
distinguish the facts in Gore from cases such as this one.
“(T]he record in this case discloses no deliberate false
statements, acts of affirmative misconduct, or concealment
of evidence of improper motive, such as were present in
Haslip and TXO.” Id. at 579, 116 S.Ct. 1589 (citing Pacific
Mutual Life Ins. Co. v. Haslip, 499 U.S. 1, 111 S.Ct. 1032,
113 L.Ed.2d | (1991) and TXO Production Corp. v. Alliance
Resources Corp., 509 U.S. 443, 113 S.Ct. 2711, 125 L.Ed.2d
366 (1993)). In contrast, the record in this case discloses all
of these factors. ?
Most of the Supreme Court’s analysis of reprehensibility
in Campbell is simply inapplicable to this case. Campbell
and Gore were primarily concerned with a defendant being
punished for actions it took in other states, particularly when
those actions may have been lawful if they took place in other
44a
Appendix C
states. Campbell, 538 U.S. at __ - 123 S.Ct. at 1521-23.
While Campbell does indicate that “[d]ue process does not
permit courts, in the calculation of punitive damages, to
adjudicate the merits of other parties’ hypothetical claims
against a defendant under the reprehensibility analysis,” the
Court’s primary concern is that “[a] defendant’s dissimilar
acts, independent of the acts upon which liability was
premised, may not serve as the basis of punitive damages.”
Id, at 1523. Apart from this, Irvin's liability is premised on a
series of events causing a single identifiable harm-disruption
of the Southern Union-Southwest Gas merger. Nor does this
Campbell guidepost foreclose a consideration of
Commissioner Irvin’s concomitant breach of the public trust
by disrupting the merger. Certainly, Irvin’s ignoble neglect
of the public trust, that was inextricably related to his
disruption of the merger may be considered by the Court on
the issue of reprehensibility.
There is significant convincing evidence supporting the
jury's decision to return a verdict assessing punitive damages
and awarding the amount chosen. Elaborating on what was
previously alluded to, Commissioner Irvin is vested with
immense powers founded in the Constitution of the State of
Arizona, and the people who elected him to this public office
had faith that he would engage his authority fairly and in
accordance with the law. The evidence shows and the jury
found that he abused those powers in favor of the private
interests of a specific utility company, ONEOK, and his
personal interests, by intentionally and deceptively
participating in dissuading the Southwest Gas Board from
adopting a plan to merge with Southern Union. Apparently
because of the wrongdoing, he concealed his activities from
45a
A ppendix ¢
his fellow Commissioners and the public during such
activities, and afterwards he covered up the wrongdoing to
ensure the outcome of the scheme. Finally, he persevered in
hiding his wrongful acts throughout the trial and in particular
while testifying in Court before the jury.
A particularly egregious act of reprehensibility occurring
during trial was the evidence that Irvin was involved in the
attempted proffer of fabricated evidence, again demonstrating
that he would persist in refusing to take responsibility for
his behavior. On October 24, 2002, the week before trial
began in the late evening, Irvin’s counsel informed the Court
that new evidence had been discovered and would be offered
at trial. This evidence included two pages of notes written
by Carol Irvin dated “7-31-99.” The notes described
a telephone conversation between Carol Irvin and
Defendant Jack Rose allegedly occurring on July 31, 1999.
Irvin’s counsel represented that the notes were taken
“contemporaneously” with the 1999 conversation. The
content of the notes emphatically indicated that Rose, an
assistant to Irvin at the time of the failed merger, told Carol
Irvin that he was principally involved in working on the
merger while “Jim [Irvin] not involved.” The truncated notes
continued, in part, to further exculpate Irvin with allegations
of Rose’s remarks that “Jim [Irvin] did nothing wrong-Jack
working with others to bring Oneok to AZ. Jim not involved-
trusted Jack to do research .. . Jack did a lot without Jim
knowing cuz Jim busy at Commiss. Jack working in AZ Best
interest. When will Jim be home-Jack needs to tell Jim s-o-
o much he doesn’t know! . . . Call me anytime! I’m there for
you! Don’t worry-we did nothing wrong.” Further, and not
appearing to be merely coincidental, the notes were written
46a
Appendix C
on the back of unrelated documents dated March 30, 1998
and April 8, 1998.
Adding to the suspicion, Irvin’s counsel said that Carol
Irvin also gave counsel a statement of her recollection of a
meeting between Commissioner Kunasek and Irvin also
occurring in 1999. Significantly, the statement was
represented to have been authored by her one week before
trial. Conspicuously, this statement was not drafted on paper
with the printed date of 1998. Further, the notes of her
conversation with Rose were styled in short, chopped phrases
as if hurriedly written. In contrast, the staternent of her
recollection of the 1999 meeting was written in complete
sentences which logically flowed from one topic to the next
and was not written with on paper with the printed 1998 on
the back.
Irvin’s counsel further represented that Carol Irvin had
disclosed to him the existence of the notes and the statement
the day before, October 23, and had provided them to him
on October 24. After this revelation, the Court ordered Irvin’s
counsel to produce the notes and the statement for inspection
by Plaintiff's and Rose’s counsel. On October 31, 2002, in
open Court and in the presence of Irvin and/or Irvin’s counsel,
Plaintiff's counsel requested an opportunity for Plaintiff's
forensic examiner to examine the notes and the Court granted
the request. The next day, on November 1, 2002, counsel for
Irvin contacted the Court at approximately noon and
requested an emergency hearing that was held in the afternoon
of the same day. Irvin’s counsel explained that a meeting
with Carol Irvin and Commissioner Irvin occurred in the
morning of that day and new information came to
47a
Appendix C
light regarding whether the notes had been prepared
contemporaneously during Carol Irvin’s 1999 conversation
with Rose. Counsel first stated that “there was considerable
confusion on the communication on those notes.” Tr. at 1286.
He then retracted his position that the notes had been made
“contemporaneously” with the 1999 Rose phone call,
concluding that he learned the notes had actually been written
the week before at the same time as the statement was written.
Irvin’s counsel apologized for the misunderstanding he had
with Carol Irvin regarding whether the notes were “original”
notes of the conversation with Rose. /d. at 1289. A subsequent
hearing was held to determine whether the initial
representation of the timing of the preparation of the notes
by counsel for Irvin, and the retraction of such representation
after Plaintiff announced that a forensic examiner would
evaluate the notes, constituted sufficient evidence pursuant
to Federal Rule of Evidence 104 for the jury to find that
Commissioner Irvin and his wife jointly proffered fabricated
evidence to the Court. Carol Irvin testified, in an attempt
to explain the misunderstanding, that she did take
contemporaneous notes of the 1999 conversation with Rose,
kept them in a file, recopied them on October 23, 2002, but
then destroyed the original. She did not offer a plausible
explanation for destroying the original notes, and Irvin’s
counsel withdrew his proffer for admission of the notes in
evidence.
Thereafter, Plaintiff sought to present the circumstances
of the attempt by counsel on behalf of the Irvins to gain
permission from the Court for admission of the notes into
evidence. Southern Union argued that this conduct was
relevant to proving that Irvin intentionally interfered with
48a
Appendix C
Southern Union’s prospective business advantage and
intentionally interfered with Southern Union’s contractual
relations. The Court delayed ruling on the request, but over
the course of trial sufficient evidence was admitted to allow
the admission of the notes and the attendant circumstances
regarding them. The Court granted Southern Union’s motion.
Central to the Court’s decision were two factors: Carol Irvin
testified that Irvin knew about the notes before she disclosed
them to his counsel, and that the day after Southern Union
announced in open court that a forensic examiner would
evaluate the notes, on November 1, Irvin attended the meeting
when a decision was made to withdraw the notes. Irvin
testified that his wife “made mention” of her notes from 1999
on the night of October 23, and that he directed her to call
his counsel that night to discuss various issues concerning
the trial. Jd. at 6084; Tr. 12/6/02 at 4789-90. On the morning
of October 24, Commissioner Irvin transported the notes in
an envelope from Carol Irvin’s possession to the office of
his counsel. Carol Irvin testified that she told her husband
that the notes were of her conversation with Rose, though
Commissioner Irvin testified that he could not recall if his
wife told him what was in the package. Tr. 12/13/02, at 6070-
1, 6073.
The Court again finds that the evidence was sufficient
for the jury to find intentional fabrication of evidence and
that it was admissible to show Irvin’s consciousness of
wrongdoing and was relevant regarding the intent of Irvin
when engaging in activities related to the claims. The jury
instructions clarified that “[e]vidence that defendant Irvin
offered fabricated evidence to the Court that he believed
would be favorable to his defense, are circumstances that, if .
49a
Appendix C
proven, may be considered by the jury as showing
consciousness of wrongdoing on the part of defendant Irvin.”
Instruction No. 20 [Doc. # 2196].
Both causes of action are intentional torts and both
involve an element of “improper motive.” The Complaint
alleged significant deceit and concealment by Irvin. The
attempted fabrication of evidence clearly shows the
reprehensibility of Irvin’s conduct. In short, he participated
in a scheme to impede the jury’s search for truth at trial.
Because this conduct occurred three years after Irvin’s
wrongful conduct regarding the merger and because it
constitutes a willful obstruction of justice, the jury could
readily find that Irvin would continue to engage in improper
conduct as a Commissioner. All of which strengthens the
jury’s concern that if Irvin was not detérred by an appropriate
award of punitive damages, he would continue to engage in
further reprehensible acts as an Arizona Corporation
Commissioner.
Finally, Irvin’s abuse of power included disregarding the
interests of the rate-payers of Arizona, which is a centerpiece
of his public duties as an Arizona Corporation
Commissioner.' The jury’s $60 million punitive damages
1. Gregory Patterson, who represented Arizona consumers as
Director of the Residential Utility Consumer Office (RUCO) during
the time of the merger, testified at trial. Mr. Patterson confirmed
that RUCO represents Arizona residential consumers as a party in
proceedings before the Commission, and had a clear stake in any
change in ownership of Southwest Gas and how it affects “the quality
of service, the viability of the company, the intention to raise rates.”
(Cont’d)
50a
Appendix C
award clearly evinces a condemnation of Irvin’s conduct, a
desire to punish him for the harm and potential harm suffered
by both Southern Union and the citizens of Arizona, and to
deter Arizona public officials from further abuses such as
meddling with multi-million dollar corporate transactions in
derogation of their duties of affording fairness to all parties
participating in Commission matters.
(2) Ratio
In Campbell, the Supreme Court “decline[{d] again to
impose a bright-line ratio [between compensatory and
punitive damages] which a punitive damages award cannot
exceed.” Campbell, 538 U.S. at__, 123 S.Ct. at 1524. Apart
from this, the Court remarked, “[oJur jurisprudence and the
principles it has now established demonstrate, however, that,
in practice, few awards exceeding a single-digit ratio between
punitive and compensatory damages, to a significant degree,
will satisfy due process.” Campbell, 538 U.S. at__, 123 S.Ct.
at 1524. In this case, the compensatory award against Irvin
was $390,072.58, meaning that the ratio of punitive to
compensatory damages is about 153 to 1. Commissioner Irvin
(Cont'd)
Tr. 5764, 5893. RUCO, representing consumers, may present its
opinions and offer evidence, though it may not vote. Tr. 5890-94.
Thus, the interests of Arizona consumers are clearly affected by the
Commission’s decisions and influence. Further, although Mr.
Patterson advocated against the Southern Union merger before the
Southwest Gas Board, he testified at trial that if he had known that
he was basing his opinion on false information about Southern
Union’s debt-to-equity ratio, he would have given a different
presentation to the Southwest Gas Board.
Sla
Appendix C
argues that the punitive damages award should be overturned
solely because this ratio is excessive.
The Supreme Court’s holding on ratios, however, is not
categorical. The opinion acknowledges that a “few awards”
exceeding a single-digitratio “to a significant degree” will
meet the constitutional mark. The Court does not explore
the circumstances under which larger awards will be upheld,
though it provides some direction. In Campbell, the Court
stated, “because there are no rigid benchmarks that a punitive
damages award may not surpass, ratios greater than those
we have previously upheld may comport with due process
where a particularly egregious act has resulted in only a small
amount of economic damages.’” Jd. at 1524 (quoting Gore,
517 U.S. at 582, 116 S.Ct. 1589). In Gore, the Court,
“reject[ing] the notion that the constitutional line is marked
by a simple mathematical formula,” surmised that “{a] higher
ratio may also be justified in cases in which the injury is
hard to detect or the monetary value of noneconomic harm
might have been difficult to determine.” /d. at 582, 116 S.Ct.
1589. Considering the Supreme Court has only recently
2. The Supreme Court’s recent pronouncements reflect a
historical understanding that punitive damages serve to punish
defendants where the harm is non-economic or difficult to quantify,
such as in this case. In an early case upholding the recognition of
the common law propriety of punitive damages, the Court noted,
“{iJn many civil actions, such as libel, slander, seduction, & c., the
wrong done to the plaintiff is incapable of being measured by a money
standard; and the damages assessed depend on the circumstances,
showing the degree of moral turpitude or atrocity of the defendant's
conduct, and may properly be termed exemplary or vindictive rather
than compensatory.” Day v. Woodworth, 54 U.S. 363, 371, 13 How.
(Cont'd)
52a
Appendix C
begun sketching these due process limits in a few cases, it is
not surprising that the Court has not considered how to
quantify the damage caused by a breach of the public trust
by a public official.
But the case law does not preclude but supports a
significant award resting on the particularly reprehensible
actions by a public official in violation of the public trust.
Because the injury caused by a public official’s violation of
the public trust is uniquely dependent on the variables of
each public office, significant consideration in each case must
be given to the nature of the public trust embodied in the
position held by the official, e.g., the President of the United
States in comparison to a precinct committee chairman.
Consequently, application of the numerical ratio is most often
unfit for the imprecise and limitless characterizations of the
public trust. Further, punitive damages against public officials
occupy a unique role in the jurisprudence of punitive
damages, and have been assessed against public officials for
oppressive conduct regardless of actual or compensatory
damages. Concomitantly, the law allows punitive damage
awards in § 1981 and § 1983 cases against public officials,
(Cont'd)
363, 14 L.Ed. 181 (1851). The Court was compelled to deny Southern
Union’s demand for damages incurred as a consequence of the failed
merger because they were !egally incapable of measurement. This
ruling is not to be interpreted as a finding that Southern Union did
not sustain such damages. It meant only that the damages were
“incapable of being measured by a money standard, and the [amount]
assessed depend[ed] on the circumstances” that necessarily involved
an elusive prediction of the degree of monetary success that would
have followed a Southern Union-Southwest Gas merger.
53a
Appendix C
even when a jury awards only nominal damages. Finally, the
Supreme Court allows consideration of unquantifiable
potential harm in assessing the ratio in these cases.
Initially, punitive damages against public officials for
violations of the public trust are firmly grounded in the law,
and the evidence suggest that punitive damages, as a
historical matter, were developed specifically as a method
to punish public corruption. According to the Restatement
(Second) of Torts § 966, comment c, “[i]n the earliest cases
in which punitive damages were allowed, the plaintiffs
suffered no substantial harm, or at least no physical or
financial harm appeared. These were the cases in which
public officials were guilty of outrageously oppressive
conduct.” As some commentators have documented, early
English “[c]ourts imposed these first exemplary damage
awards against public officials who abused power in their
official capacity, but the remedy soon took on a wider role.”
Michael L. Rustad & Thomas H. Koenig, Taming the Tort
Monster; The American Civil Justice System as a
Battleground of Social Theory, 68 Brook. L.Rev. 1, 57
(2002).° See also Lane County v. Wood, 298 Or. 191, 200,
691 P.2d 473, 477 (Or.1984) (“Historically, oppressive
3. Professors Rustad and Koenig explore the history of English
and early American punitive damages in some detail, noting, for
example, that “[jJust as Roman Senators were assessed multiple
damages when they oppressed the weak, the English courts punished
high-handed aristocrats by imposing large fines paid directly to the
victim.” /d. at 55. Notably, the Court has often relied on this history
in discerning Constitutional limits on punitive damages. See Gore,
517 U.S. at 580-581, 116 S.Ct. 1589 (analyzing early English statutes
on exemplary damages).
S4a
Appendix C
conduct by public officers was the situation where early
judges were most prone to sanction exemplary damages, and
by which they justified and rationalized the doctrine.”)
(quoting McCormick, Damages 288, § 81 (1935)).
Because of this history, and the unique harm inflicted
by a breach of the public trust, punitive damage awards
assessed against public officials have in some cases required
less of a proportional connection to actual monetary damages
to be upheld. In Lane County v. Wood, 298 Or. 191, 691 P.2d
473 (Or.1984), the Supreme Court of Oregon thoroughly
explored the history of punitive damages as related to public
officials, and concluded that an award of nominal damages
could support an award of punitive damages against a public
official where the public official committed a breach of the
public trust. Subsequent Oregon cases have clarified that this
principle is limited to awards against public officials; in
almost all cases, some amount of compensatory damages is
necessary for an award of punitive damages. See Klinicki v.
Lundgren, 298 Or. 662, 686, 695 P.2d 906, 922 (Or.1985)
(“{A]bsent breach of public trust or cases in which damages
are presumed, punitive damages cannot be awarded merely
to punish... In other words, a proven discrete, discernable
harm must underlie any punitive damages award.”),
In Lane County, the plaintiff county sued a former county
commissioner for fraud, breach of fiduciary duty, and breach
of statutory duty for actions taken when the commissioner
was still in office. In striking similarity to this case, a
commissioner rigged a land deal to benefit two of his friends
by manipuiating his position as commissioner. The jury
returned a verdict of $1.00 in nominal damages but $5000 in
55a
Appendix C
punitives against the commissioner. The Oregon Court, after
extensively reviewing the history, the Restatement, and
leading authorities, concluded that the commissioner’s
actions, in breach of his fiduciary duty to the public, were
“so egregiously culpable that an award of nominal damages
is sufficient to support the award[ ] of punitive damages
against [him].” 691 P.2d at 479.*
Lane County indicates that a violation of the public trust
is itself a considerable, cognizable harm, though one without
a definitive monetary value. Here, Irvin abused the public
trust by misappropriating his elected authority to undermine
fair consideration of Southern Union’s offer. Southern Union
suffered from Irvin’s failure to afford it a fair and unbiased
4. An analogous case which the Oregon court appears not have
considered is Wilson v. Vaughn, 23 F. 229 (C.C.D.Kan.1885). In that
case, the Court held that exemplary damages could be awarded
against public officials even where only nominal damages were
found. The plaintiff sued county commissioners to recover damages
for their wilful refusal to levy a tax on property pursuant to a valid
judgment and writ of mandamus. The plaintiff suffered only delay
of collecting the judgment, and thus only nominal damages. However,
the Court upheld an award of exemplary damages, noting, “the
plaintiff is deprived of a clear legal right through the wrongful and
wilful conduct of the defendants. They alone have the power to levy
the tax, and it is their duty, under the law and the command of the
court, to levy it... [PJlaintiff’s compensatory damages are but
nominal ... but it is in the power of these defendants and their
successors in office, by defying the law, to delay him indefinitely in
its collection.” /d. at 231-2. Thus, the Oregon court had at least one
century-old pedigree to support its holding. See also EEOC v. Wal-
Mart Stores, Inc., 11 F.Supp.2d 1313, 1326 (D.N.M.1998) (relying
on Wilson for the proposition that “exemplary damages may be
awarded where only nominal damages are established”).
56a
Appendix C
investigation and consideration of its proposal for a merger.
Apart from this injury, the public suffered by virtue of Irvin’s
bold defiance of the law that defined his duties and
responsibilities. Accordingly, Irvin’s argument that he, as a
public official, should not be subject to different potential
punitive damage standards as other defendants verges on
being frivolous. The ratio of compensatory to punitive
damages is not justified merely because Irvin is a public
official, but because his conduct caused a harm to the public
trust that is not discernable merely by an award of
compensatory damages. Cf. Davis v. McLaughlin, 1989 WL
47699, *2 (E.D.N.Y. April 28, 1989) (“While it is true that a
comparison of the two numbers might be a provident exercise
in many cases, their ratio is of dubious value where, as here,
intangible rights have been vindicated by plaintiff’s
successful claim.”).
The decisions which allow the assessment of punitive
damages in § 1983 suits filed against public officials, even
when damages are only nominal (which almost always
produces a ratio far in excess of 10:1), demonstrate a
recognition in the law of the vital importance of preserving
the public’s trust in those who are chosen to govern, and to
exercise their precious and sometimes almost limitless
powers to effect changes and alter consequences effecting
the lives of the very people who empowered the official.
Following Gore, the Second Circuit has upheld an award of
punitive damages in a case where only nominal damages were
awarded against a public officer. In Lee v. Edwards, 101 F.3d
805 (2d Cir.1996), the Court upheld a punitive damages
award of $200,000 in a case where plaintiff prevailed on a
malicious prosecution claim. The Court noted, “the jury was
57a
Appendix C
obviously unimpressed by Lee’s claim to have suffered harm
by reason of being prosecuted maliciously,” however, “[a]s
a police officer, Edwards exercised an authority backed by
the weight and force of state power,” which could allow the
jury to find the officer’s conduct “egregious and
reprehensible.” Jd. at 810. The Court noted that Gore ‘s
disapproval of a 500: 1 compensatory to punitives ratio “does
not necessarily control the fair ratios in a § 1983 case. We
have said that punitive damages may be awarded in a § 1983
case, even if the compensatory damages are only nominal.”
Id. at 811 (citing King v. Macri, 993 F.2d 294, 297-98 (2d
Cir.1993)). In short, “in a § 1983 case in which the
compensatory damages are nominal, a much higher ratio can
be contemplated while retaining normal respiration.” /d.
Indeed, a number of courts have held that an award of
nominal damages (or sufficient proof of injury) can support
an award of punitive damages under § 1981 and § 1983,
situations which in particular involve wrongdoing by a
public officer. See Gill v. Manuel, 488 F.2d 799, 802 (9th
Cir.1973) (in case where plaintiff sued police officers under
§ 1983, noting that “an award of punitive damages is not a
necessary prerequisite to an award of punitive damages.”);
Hennessy v. Penril Datacomm Networks, Inc., 69 F.3d 1344,
1352 (7th Cir.1995) (holding that award of compensatory
damages is not necessary to support award of punitive
damages under § 1981); Timm v. Progressive Steel Treating,
Inc., 137 F.3d 1008, 1010 (7th Cir. 1998) (holding, post-Gore,
no requirement of compen* tory damages to support punitive
damage award in Title «!' sex discrimination suit) (citing
Erwin v. Manitowoc €— inty, 872 F.2d 1292, 1299 (7th
Cir. 1989) (holding no requirement of compensatory damages
58a
Appendix C
to award punitive damages for constitutional damages under
§ 1983)); King v. Macri, 993 F.2d 294, 297-8 (2d Cir.1993)
(punitive damage award need not be based on compensatory
award in § 1983 actions) (citing Press Pub. Co. v. Monroe,
73 F. 196, 201 (2d Cir. 1896) (holding, in action for violation
of copyright, “exemplary damages are awarded in the federal
ceurts, namely, as something additional to, and in no wise
dependent upon, the actual pecuniary loss of the plaintiff,
being frequently given in actions ‘where the wrong done to
the plaintiff is incapable of being measured by a money
standard.’ ”) (quoting Day, 54 U.S. at 371, 54 U.S. 363)).
See also Deters v. Equifax Credit Information Serv., 202
F.3d 1262 (10th Cir.2000) (upholding 59:1 punitive to
compensatory ratio in Title VII case with small compensatory
damage award where injury was primarily non-economic).
Further, although the Supreme Court has not addressed
this issue in its recent punitive damages decisions, it has
emphasized the importance of punitive damages assessments
against public officials. In the context of § 1983 suits against
public officials for violations of constitutional rights, the
Supreme Court has noted:
By allowing juries and courts to assess punitive
damages in appropriate circumstances against the
offending official, based on his personal financial
resources, the statute directly advances the
public’s interest in repeated constitutional
deprivations. In our view, this provides sufficient
protection against the prospect that a public
official may commit recurrent constitutional
violations by reason of his office. The Court
59a
Appendix C
previously has found, with respect to such
violations, that a damages remedy recoverable
against individuals is more effective as a deterrent
than the threat of damages against a government
employer.
City of Newport v. Fact Concerts, Inc., 453 U.S. 247, 269,
101 S.Ct. 2748, 69 L.Ed.2d 616 (1981) (citing Carlson v.
Green, 446 U.S. 14, 21, 100 S.Ct. 1468, 64 L.Ed.2d 15
(1980)). Public official punitive damage awards advance the
public interest. by deterring a reappearance of official
misconduct. If awards were restricted to adhere to a formula
for calculating the punitive harm, the goal of deterrence, in
some case, will be lost.
The Court realizes, of course, that the this case was not
brought as a civil rights action. However, th« same reasoning
supports a punitive award to punish and deter the abuse of
power by public officials in ihese cases. First, the conduct
here bears the hallmarks of a civil rights action, including
an official acting under color of state law, intentional
misconduct, and biased and differential treatment of parties
before the Commission in ways that undermine due process
and equal protection of the laws. Although Southern Union,
as a corporation, may not be able to bring a § 1983 suit, such
due process violations affect the public as a whole.
Corporation commissioners possess wide powers to “inspect
and investigate the property, books, pape: business,
methods, and affairs of any corporation whose stock shall
be offered for sale to the public and of any public service
corporation doing business within the state, and for the
purpose of the commission, and of the several members
60a
Appendix C
thereof, shall have the power of a court of general jurisdiction
to enforce the attendance of witness and production of
evidence by subpoena, attachment, and punishment, which
said power shall extend throughout the state.” Jury Instruction
No. 15 [Doc. # 2196] (emphasis added). As the Arizona
Supreme Court has noted,
When an Arizona administrative agency
unreasonably infringes on the liberties of a
corporation, its officers, and its shareholders, it
is the Arizona courts who must be able to curb
the abuse of power. The Corporation Commission
has been treated as a fourth branch of government
in Arizona ... {I]f an administrative agency’s —
investigation becomes a tool of harassment and
intimidation rather than a means to gather
appropriate information, the appropriate court
may intrude and stop the incursion into the
constitutional liberties of the particvs under
investigation ... The Commission is empowered
to investigate for purposes of enforcing the
securities laws; the Commission has no authority
to determine on a basis other than compliance with
the securities laws those persons or corporations
who may conduct business in Arizona. The
Commission may not constitutionally use its
investigatory powers to harass, intimidate, and
defame a business into leaving the state.
Polaris International Metals Corp. v. Arizona Corporation
Commission, 133 Ariz. 500, 506-7, 652 P.2d 1023, 1029-30
(1982). The record is replete with evidence of bias and a
6la
Appendix C
failure to provide due process and impartial consideration
of Southern Union’s offer.
Second, the civil rights cases reflect a broader goal of
deterring abuses of the public trust by public officials that is
not limited to individual constitutional rights violations. As
the Second Circuit noted in Zarcone v. Perry, 572 F.2d 52,
56-7 (2d Cir.1978), in a decision upholding punitive damages
against public officials for constitutional violations, “it is
clear that substantial exemplary damage verdicts are
appropriate in intentional tort actions not involving
constitutional depri»ations.” See also Lane County, 691 P.2d
at 479 (“It may be that the property involved appreciated in
value so that no actual loss was sustained by the county, but
that fortuitous result does not diminish the severity of the
wrongful acts ... The misconduct by [the defendants] was
intentional, not just careless. The scheme was premeditated,
not reckless. The two defendant, motivated by greed, were
found by the jury to have acted together knowingly to violate
an official trust place on Wood by the public.”).
Moreover, the Supreme Court has not limited the ratio
calculation to actual compensatory damages, and has
suggested that comparisons to potential harm are appropriate.
In TXO, the Court upheld a punitive damages award where
the ratio of punitive to compensatory damages was about
526:1, relying in part on the potential for damages caused by
the defendant’s conduct. The plurality noted that “this Court
[has] eschewed an approach that concentrates entirely on the
relationship between punitive and actual damages. It is
appropriate to consider the magnitude of the potential harm
that the defendant would have caused to its intended victim
62a
Appendix C
if the wrongful plan had succeeded .. .” TXO, 509 U.S. at
459, 113 S.Ct. 2711 (plurality opinion) (italics in original).
The use of potential harm in assessing the ratio continues
throughout the Court’s most recent decisions, but neither
Gore nor Campbell involved an issue of potential harm
because the issue was not relevant in those cases. See Gore,
517 U.S. at 575, 116 S.Ct. 1589 (describing second guidepost
as “the disparity between the harm or potential harm. . . and
[the] punitive damages award”); id. at 581, 116 S.Ct. 1589
(relying on the plurality’s “potential harm” holding in TXO
to discern lower ratio in that case); Campbell, 538 U.S. at
__, 123 S.Ct. at 1520 (describing second guidepost in terms
of “actual or potential harm’”).°
5. Notably, in this case, the ratio is dramatic primarily because
the Court previously found Southern Union’s lost profit calculations
to be too speculative to support recovery for lost profits, and limited
Southern Union to recovery of only out-of-pocket reliance damages.
See Southern Union Co. v. Southwest Gas Corp., 180 F.Supp.2d 1021,
1051 (D.Ariz.2002) (“The indeterminacy concerning this basic
merger term illustrates that Southern Union’s claim for los: profit
damages is too speculative to support recovery.”). To the extent that
due process limits the size of a punitive damage award because the
defendant is not on notice of his potential liability, Irvin’s undisputed
experience and knowledge made him aware of the potential enormous
risks of his conduct would have in disrupting a multi-million dollar
transaction. See Campbell, 538 U.S. at __, 123 S.Ct. at 1525 (quoting
Gore, 517 U.S. at 585, 116 S.Ct. 1589 (Breyer, J., concurring))
(discussing fair notice requirements); Gore, 517 U.S. at 574, 116
S.Ct. 1589 (“Elementary notions of fairness enshrined in our
constitutional jurisprudence dictate that a person receive fair notice
... Of the severity of a penalty that a State may impose.”). See also
the discussion of Southern Union’s damages supra at 9, n. 2.
63a
Appendix C
Again, though the Court held that Southern Union was
not entitled to recover damages for speculative lost profiis,
the potential for such damage could be factored into the jury’s
decision to punish Irvin. For example, ar “ther district court
in the Ninth Circuit recently upheld a punitive damages award
of $5,000,000 in a § 1981 racial discrimination case against
a private corporation even though the jury found only nominal
damages. See Bains LLC v. Arco Products Co., 220 FSupp.2d
1193, 1201 (W.D.Wash.2002). As the Court noted, “[t]he
jury’s award of nominal damages and high punitive damages
is reflective of its findings that while compensatory damages
were difficult to calculate, the egregiousness of Defendant’s
conduct was obvious to everyone in the courtroom.” /d. at
1201. See also Swinton v. Potomac Corp., 270 F.3d 794, 819
(9th Cir.2001) (in upholding a 28:1 punitive to compensatory
damage ratio in private racial harassment claim, noting “[t}he
fact that the harm from unchecked racial] harassment
occurring day after day cannot be calculated with any
precision does not deflate its magnitude’’).
In short, in consideration of the unquantifiable breach
of the public trust by Irvin and the significant potential
damages faced by Southern Union, reliance upon the ratio
of punitive to compensatory damages is unwarranted. In a
case of such egregiousness, the benchmark of a simple
numerical ratio, where the Supreme Court has repeated!y
Clarified that it has not established a bright-line categorical
rule, does not defeat the award because it violates due
process. Cf. Swinton, 270 F.3d at 819 (“We find little comfort
in trying to discern [ratio] parameters from other cases
because the circumstances vary so widely. Such an exercise
simply results in a scatter graph that pushes the decision
64a
Appendix C
toward a mathematical bright-line, a path that we eschew in
accord with the Supreme Court guidelines.”). Under the
second Campbell guidepost, the award is not constitutionally
excessive.
(3) Penalties imposed in comparable cases
The third guidepost is a comparison of the punitive
damages award with civil or criminal penalties for
comparable misconduct. Campbell, 538 U.S. at__, 123 S.Ct.
at 1526. The exact method of application of this criterion in
unclear in Gore or Campbell. In Campbell, the Court rejected
comparable civil and criminal penalties as a justification for
the size of the award, noting that “(t]he existence of acriminal -
penalty does have bearing on the seriousness with which the
State views a wrongful action. When used to determine the
dollar amount of the award, however, the criminal penalty
has less utility.” /d. at 1526. Further, the Court noted that
the most relevant civil sanction involved a maximum fine of
$10,000. Id. In Gore, 517 U.S. at 583-5, 116 S.Ct. 1589, the
Court also noted that the defendant’s actions were subject to
a much smaller civil fine than the award of punitive damages.
Irvin argues that this punitive damages award should be
struck down because it far exceeds any comparable or civil
penalty, and also exceeds any punitive damages award upheld
in Arizona. Irvin relies on Ace v. Aetna Life Ins. Co., 139
F.3d 1241, 1248-9 (9th Cir.1998), in which the Ninth Circuit,
without extensive comment, invalidated a $16.5 million
sunitive damages award with a 130-to-1 punitive-to-
compensatory damages ration where “the ratio ... is far
beyond any approved by Alaska courts. . . [and] the amount
65a
Appendix C
of punitive damages far exceeds the potential civil and
criminal penalties.” Southern Union argues that the award
does not exceed awards upheld in a few other (out-of-state)
cases, and thus Irvin was on notice of the prospect of
sufficiently large penalties. See, e.g., TXO, 509 U.S. at 459,
113 S.Ct. 2711 (1993) (upholding 526 to | punitive to
compensatory damage ratio); Jn re Exxon Valdez, 236
F.Supp.2d 1043 (D.Alaska 2002) (upholding $4 billion of
punitive damages award in case involving economic (not
environmental) damage of oil spill). As for state civil
penalties, Southern Union essentially concedes that none
would mandate any comparable monetary award unless Irvin
was ordered to pay restitution for lost profits. However, under
Arizona law, even if Irvin were required to pay restitution as
part of a criminal conviction, the sum would not include
compensatory damages such as lost profits. A.R.S. § 13-
105(14); 13-804(A). On the other hand, Irvin’s conduct
almost certainly could be framed as mail and wire fraud under
federal law, and, if proven, he would be subject to a fine
“not more than the greater of . . . twice the gross [pecuniary]
loss” to Southern Union. 18 U.S.C. § 3571(d).
Unfortunately, the cases cited by the parties do not
involve circumstances analogous to Irvin’s misconduct
in this case. Such comparisons provide no meaningful
guidance for the Court to determine whether the award is
unconstitutionally excessive. As the Supreme Court has
noted, “the most important indicium of the reasonableness
of a punitive damages award is the degree of reprehensibility
of the defendant’s conduct.” Campbell, 538 U.S. at __, 123
S.Ct. at 1521 (quoting Gore, 517 U.S. at 575, 116 S.Ct. 1589).
Here, the degree of reprehensibility is established by the
66a
Appendix C
breach of the public trust, and the parties provide no case
Jaw concerning punitive damage awards against Arizona
public officials. As previously discussed, awards against
public officials for breach of the public trust occupy a unique
status in the imposition of punitive damages. See Lane
County, 691 P.2d at 479. Again, it is difficult “to discern
parameters from other cases because the circumstances vary
so widely.” Swinton, 270 F.3d at 819. Finding some concrete
numerical limit to this award grounded in the Constitution
is “not an enviable task” and not amenable to ready
application of a formula. Leatherman Tool Group, Inc. v.
Cooper Industries, Inc., 285 F.3d 1146, 1152 (9th Cir.2002)
(quoting Inter Medical Supplies v. EBI Medical Systems, 181
F.3d 446, 468 (3rd Cir.1999)). Under the Campbell and Gore
guideposts, in consideration of Irvin’s egregious conduct
flaunting the public trust, the award is not constitutionally
excessive, and the Court need not hypothesize some outer
limit to the punitive damages allowable in this case.
C. Additional findings
The Court notes that Commissioner Irvin should be
personally liable for payment of the punitive damages award.
For example, under the Bankruptcy Code, 11 U.S.C.
§ 523(a)(6), a debt is not dischargeable in bankruptcy
proceedings when it is incurred “for willful and malicious
injury by the debtor to another entity or to the property of
another entity.”” Commissioner Irvin, as clearly shown by the
jury’s verdict, engaged in fraudulent activity constituting
tortious conduct resulting in a willful and malicious injury
to Southern Union. See In re Jercich, 238 F.3d 1202, 1205-6
(9th Cir.2001) (tortious conduct causing willful and malicious
67a
Appendix C
injury is not dischargeable under § 523(a)(6)); /n re Riso,
978 F.2d 1151, 1154 (9th Cir.1992) (same). Further, a public
employee is only immune from liability for punitive damage
awards if acting within the scope of his employment.
A.R.S. § 12-820.04. Though that issue was never presented
to the jury for resolution, the record in this case strongly
suggests that he was not.
In conclusion, the reasoned judgment of the jury that
Commissioner Irvin should be punished in an amount of $60
million will stand.
Accordingly,
IT IS ORDERED that Defendant Irvin’s Amended
Motion for JNOV or in the Alternative for New Trial or
Remittitur [Doc. # 2238] is DENIED.
DATED this 31 day of July, 2003.
Roslyn O. Silver
United States District Judge
68a
APPENDIX D — FINAL JUDGMENT OF THE UNITED
STATES DISTRICT COURT FOR THE DISTRICT OF
ARIZONA ENTERED AUGUST 18, 2003
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF ARIZONA
SOUTHERN UNION COMPANY,
a Delaware corporation,
Plaintiff,
VS.
SOUTHWEST GAS CORPORATION,
a California corporation, et al.,
Defendants.
No. CIV-99-1294-PHX-ROS
Pertaining to all Cases:
CIV-99-1294-PHX-ROS
CIV-00-0119-PHX-ROS
CIV-00-0452-PHX-ROS
CIV-00-1775-PHX-ROS
August 14, 2003, Dated
August 18, 2003, Lntered
FINAL JUDGMENT
These consolidated actions came on for jury trial on
October 29, 2002, the Honorable Roslyn O. Silver presiding.
On December 18, 2002, all remaining matters having been
duly tried and submitted to the jury, the jury rendered its
verdict in matter CIV-99-1294-PHX-ROS. Judgment is
hereby entered in favor of Southern Union Company and
against Defendant James M. Irvin as follows: (1) On Southern
69a
Appendix D
Union’s claim for intentional interference with contract, the
sum of $975,181.46, adjusted by relative degrees of fault to
$390,072.58; (2) On Southern Union’s claim for intentional
interference with business expectancy, the sum of
$975,181.46, adjusted by relative degrees of fault to
$195,036.29; (3) The higher amount of $390,072.58
constitutes the total actual damages assessed against
Defendant Irvin, and in favor of Southern Union; (4) Punitive
damages in the sum of $60,000,000.00; (5) Its cost of suit as
taxed by the Clerk and as approved by the Court.
DATED this 14 day of August, 2003.
s/ Roslyn O. Silver
Roslyn O. Silver
United States District Judge
70a 3
APPENDIX E — OPINION OF THE UNITED STATES
DISTRICT COURT FOR THE DISTRICT OF
ARIZONA DENYING MOTION FOR JUDGMENT
NOTWITHSTANDING THE VERDICT AND FOR A
NEW TRIAL ENTERED AUGUST 28, 2003
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF ARIZONA
281 F. Supp. 2d 1117
SOUTHERN UNION COMPANY,
a Delaware corporation,
Plaintiff,
v.
SOUTHWEST GAS CORPORATION,
a California corporation, et al.,
Defendants.
CV-99-1294-PHX-ROS
August 24, 2003, Decided
August 28, 2003, Entered
GrINION
SILVER, District Judge.
On December 18, 2002, the jury returned a verdict for
Plaintiff Southern Union Company (“Southern Union” or
“SUG”) against Defendant James Irvin (“Irvin” or
“Commissioner Irvin”). This Order summarizes and explains
a number of evidentiary rulings made during trial-and the
Tla
Appendix E
Court’s decision to deny Irvin’s Motion for Judgment
Notwithstanding the Verdict. in particular, on December 10,
2002, the Court held a hearing and issued final rulings on
the admissibility of certain evidence raised during the cross-
examination of Commissioner Irvin. The Court allowed
Plaintiff Southern Union to question Irvin on nofes written
by his wife, Carol Irvin, in October 2002, and on the Clean
Elections Act Qualifying Contribution Form (“Qualifying
Contribution Form” or “Contribution Form” or “Form’”’)
signed by Irvin in May 2002 under penalty of perjury. The
Court promised a written opinion would follow. This is that
opinion.
I. Background
On December 18, 2002, after a jury trial of nearly two
months, the jury returned a verdict for Plaintiff Soi ‘ern
Union Company (“Southern Union”) against James Irvin, the
only remaining Defendant at the conclusion of trial.’ Plaintiff
prevailed on both causes of action, intentional interference
with business expectancy and intentional interference with
contractual relations, caused by Irvin’s improper and
wrongful activities in early 1999 to bring about the merger
between Southwest Gas Corporation (SWG) and ONEOK,
Inc. instead of SWG and Plaintiff. The evidence of wrongful
conduct established that Irvin, a Corporation Commissioner
at the time of the activities relating to the merger, was
1. Jack Rose was a Defendant at the beginning of and
throughout the trial, until closing arguments at which time he reached
a settlement with Plaintiff on December 13, 2002. Rose invoked his
Fifth Amendment privilege against self-incrimination before and
during trial and therefore did not testify about his activities in early
1999 or the alleged phone conversation with Carol Irvin in 1999.
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instrumental in ensuring that ONEOK rather than the Plaintiff
was the chosen merger partner by the SWG Board of
Directors.
During cross-examination of Defendant Irvin, Plaincff
was allowed to pursue questioning on two issues.’ First was
the notes of a purported conversation Carol Irvin, the wife
of Commissioner Irvin, had with Jack Rose in July 1999 and
her statement of an alleged event she witnessed in 1999, that
was memorialized in the statement. The two separate
documents (“the Carol Irvin notes”) were initially brought
to the Court’s and to counsels’ attention by Irvin’s counsel
on October 24, 2002 and proffered as new and material
evidence. After Southern Union informed counsel and the
Court that a forensic examiner would be proffered to testify
to his opinion regarding when the notes were prepared, the
following afternoon counsel for Irvin withdrew the notes as
possible evidence. The second issue was evidence that Irvin
had been untruthful in signing a Qualifying Contribution
Form from a supposed contributor, Ken Dickson, who swore
that he never contributed money to Irvin despite the express
2. Ata hearing held Sunday, December 8, 2002, after the Carol
Irvin notes and Clean Elections form issues concerning Irvin's
testimony had been raised during trial but before Irvin resumed the
stand, the Court gave clear notice to Irvin’s counsel of decisions on
the admissibility of this evidence. Tr. 4918-22. The Court gave
warning to the parties, “I am tclling you this today because I want
you to certainly confer with (Commissioner Irvin} before he [retakes]
the stand ... and after you’ve had a chance to brief the issues which
I’ve presented to you.” Tr. at 4920. Then the Court informed counsel
that inquiry into the two areas of contention would be allowed if
Irvin resumed his testimony.
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statement on the form to the contrary. Plaintiff sought to
introduce Irvin’s false statements on the Contribution Form
as impeachment evidence.
II. -The Carol Irvin Notes
On October 24, 2002, the week before trial began, Irvin’s
counsel informed the Court in the late evening that new
evidence had been discovered and would be offered at trial.
This evidence included two pages of notes written by Carol
Irvin dated “7-31-99.” The notes described a telephone
conversation between Carol Irvin and Defendant Jack Rose,
an assistant to Irvin at the time of the failed merger, occurring
on July 31, 1999, and the notes were represented as made
“contemporaneously” with the 1999 conversation. The notes
unambiguously expressed that Rose allegedly informed Ms.
Irvin of his sentiment and opinion, that he was principally
involved in working on the merger while “Jim [Irvin was]
not involved.” The notes continued, in part, to exculpate Irvin
with Rose’s alleged remarks that “Jim [Irvin] did nothing
wrong-Jack working with others to bring Oneok to AZ. Jim
not involved-trusted Jack to do research .. . Jack did a lot
without Jim knowing cuz Jim busy at Commiss. Jack working
in AZ Best interest. When will Jim be home-Jack needs to
tell Jim s-o-o much he doesn’t know! .. . Call me anyume!
I’m there for you! Don’t worry-we did nothing wrong.”
Further, the notes were written on the back of unrelated
documents dated March 30, 1998 and April 8, 1998, which
gave credence to the statement of Irvin’s counse! that the
notes were made in 1999, contemporaneously with the phone
call. Concomitantly, the written statement of an event
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occurring in 1999, which was represented as drafted by Carol
Irvin two weeks prior to the October 24 hearing, was written
on blank paper. This feature further supported the proposition
that the notes, in contrast, were made contemporaneously
during the Rose conversation. Also, the notes are not
complete sentences but are unconnected words or phrases
appearing as if Carol Irvin was listening to Rose speak and
hurriedly taking down the meaning of the statements. In
comparison, however, the memorandum of the event in 1999
was written with complete sentences and appropriate
paragraphs as if written in thoughtful recollection of that
event.
After I
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