Security Title Agency, Inc. v. Pope, 1 CA-CV 07-0272.

• Decision Date: 29 July 2008
• Docket Number: No. 1 CA-CV 07-0272.,1 CA-CV 07-0272.
• Citation: 200 P.3d 977,219 Ariz. 480
• Parties: SECURITY TITLE AGENCY, INC., an Arizona corporation, Plaintiff/Appellant-Cross Appellee, v. Linda Lorene POPE and Thomas E. Pope, husband and wife, Defendants/Appellees, and First American Title Insurance Company, a California corporation, Defendant/Appellee-Cross Appellant.
• Court: Arizona Court of Appeals

200 P.3d 977

219 Ariz. 480

SECURITY TITLE AGENCY, INC., an Arizona corporation, Plaintiff/Appellant-Cross Appellee, v. Linda Lorene POPE and Thomas E. Pope, husband and wife, Defendants/Appellees, and First American Title Insurance Company, a California corporation, Defendant/Appellee-Cross Appellant.

No. 1 CA-CV 07-0272.

Court of Appeals of Arizona, Division 1, Department D.

July 29, 2008.

Review Denied January 6, 2009.

Hahn Loeser & Parks LLP by Steven A. Goldfarb, Andrew S. Pollis, Cleveland, and Fennemore Craig, P.C. by Timothy Berg, Janet Weinstein, Phoenix, Attorneys for Appellant-Cross Appellee Security Title Agency, Inc.

The Cavanagh Law Firm, P.A. by Jeffrey B. Smith, Phoenix, Attorneys for Appellees Linda Lorene and Thomas E. Pope.

Bryan Cave LLP by Lawrence G. Scarborough, J. Alex Grimsley, James D. Smith, Meridyth M. Andresen, Phoenix, Attorneys for Appellee-Cross Appellant First American Title Insurance Company.

JOHNSEN, Presiding Judge.

¶ 1 At issue in this appeal are whether the superior court erred in refusing to grant judgment as a matter of law ("JMOL") to First American Title Insurance Company ("First American") on a claim for aiding and abetting a breach of fiduciary duty brought by Security Title Agency, Inc. ("Security Title") and whether the court erred in setting aside a $35 million punitive damages award against First American. We conclude sufficient evidence supports the jury's verdict and an award of punitive damages, but hold that the punitive damages award is unconstitutionally excessive and order it reduced.

FACTUAL AND PROCEDURAL HISTORY

¶ 2 Security Title's claim against First American arose out of the latter's recruitment of Linda Pope, at the time a branch manager, assistant vice president and officer of Security Title. Because our review in large part focuses on whether sufficient evidence supports the jury's finding that First American aided and abetted Pope's breach of fiduciary duty and the jury's award of punitive damages, we set out at some length the evidence presented at the seven-week trial.¹

A. Creation of The Talon Group.

¶ 3 First American is a title insurance company headquartered in Santa Ana, California. As of 2004, it was the second largest title insurance company in the United States. It had been the largest, but lost that ranking in 2000 to Fidelity National Financial ("Fidelity"), Security Title's parent company. Aiming at regaining the top position, First American initiated a multiple-brand strategy that involved the creation of The Talon Group ("Talon") in 2003. Talon is a division of First American that sells title insurance policies underwritten by First American. First American hired Bill Halvorsen as Talon's president and James Clifford and Nick Velimirovich as senior vice presidents of Talon and vice presidents and officers of First American. Clifford and Velimirovich were designated co-managers "of Arizona for Talon."

¶ 4 Halvorsen created a Business Plan/Executive Summary (the "Business Plan") for Talon. The Business Plan outlined First American's objectives and strategies with regard to Talon:

Build an operation that will offer traditional title insurance customers and agents a new and self-competitive brand.... While national in scope, it will operate only in the top real estate markets and only in segments where it can quickly establish share and profit. It will depend heavily on the recruitment of people who can influence business decision makers.

Because the title insurance industry is a "relationship business," the Business Plan called for hiring key people from other title insurance companies who had relationships with key customers and other key employees. According to Clifford, Pope was such a key person; she managed a Security Title office that was one of the largest and most successful title insurance branches in the industry.

B. First American's Recruitment of Pope and Pope's Solicitation of Security Title's Employees.

¶ 5 It was Clifford's idea to recruit Pope for Talon, and he was the one primarily responsible for doing so. He first met with Pope on August 26, 2003. Clifford learned from Pope that the branch Pope ran, called Branch 66, had annual revenue of $8 million. In a deposition excerpt read to the jury, Clifford testified he thought that in order for that revenue to transfer from Branch 66 to Talon, Pope would have to bring most of the branch's employees with her. He testified he had hoped that many other Branch 66 employees "would want to come with" Pope.

¶ 6 Shortly after her first meeting with Clifford, Pope arranged for him to meet with four of her senior employees, Nyla Tarpley, Branch 66's marketing director, and three department heads, Amy Osborn, Patti Brittain and Debbie Tucker, who also was the assistant branch manager. According to Clifford, it was Pope's idea to set up the meetings, and she attended all of them except for the one with Tarpley.

¶ 7 Tucker testified at length about her first meeting with Clifford, which took place on September 10. Over drinks and dinner, Clifford described Talon in terms that interested Tucker; she felt that Clifford was recruiting her to join the new company. Tucker testified that Pope had related she was planning on all of the Branch 66 employees, approximately 40 persons, going with her to Talon. As the dinner discussion continued, Clifford "came up with the idea of leaving in waves." Under that arrangement, Pope and Tucker would leave to join Talon first; department heads then would give their two weeks' notice and after they left, their assistants in turn would depart. Tucker testified that Clifford explained that the employees could not leave all at once because they "needed to make it look proper and doing it the correct way." Clifford said he "[w]anted to make it look right," Tucker testified. On her way home from their dinner meeting with Clifford, Tucker spoke by cell phone with Pope and told her that she would commit to go with her to Talon.

¶ 8 After that, Pope actively involved Tucker in the preparations to move to Talon. At Pope's direction, Tucker arranged for employees to begin organizing their desks and files in anticipation of the move. In the third or fourth week of September, Tucker accompanied Pope to visit an office site Talon was considering leasing for the new group. At Pope's request, and using a list of Branch 66 employees, Tucker marked up a set of plans for the new office to show where each of the various employees would sit. Tucker testified that she returned the marked-up plans to Clifford during a lunch on September 30.

¶ 9 From time to time in September and early October, Tucker testified, Pope called department-head meetings at which she discussed the move to Talon. Pope showed the department heads (there were ten to 15 of them) a written comparison prepared by Clifford's assistant at Talon showing that employees could obtain health benefits for less at Talon than at Security Title. More generally, Tucker testified, Pope "would try to get us excited and anxious about making the move. She would tell us how much better it was going to be, how much better the computer system would be, the benefits would be. So she, in turn, would—kind of recruit[] us."²

¶ 10 Tucker also testified that at Pope's direction, she located a form to be used by buyers and sellers to move their escrow files from one title company to another. At Pope's direction, she and the five escrow officers in the office prepared forms directing Security Title to transfer escrow files to Talon.

¶ 11 Meanwhile, Pope continued to seek commitments from other Branch 66 employees to go with her to Talon. Tarpley testified that shortly after Pope first met with Clifford, Pope arranged a lunch meeting so that Tarpley could meet Clifford. She testified that Clifford tried during lunch to recruit her for Talon, saying that whatever marketing tools she needed would be available for her at the new company.

¶ 12 Tarpley testified that soon after her August 29 lunch with Clifford, Pope directly asked her to commit to going with her to the new company: "She wanted me to go with her, yes. She wanted a commitment." Tarpley told Pope she would commit if she could bring her assistant with her, and Pope agreed. Tarpley testified that Pope told her the move would be "financially well worth it" for all the employees and asked her how "$5,000 a month sound[ed]." Later, Tarpley testified, Pope acknowledged to her that Pope "could get in trouble for talking to us about the new company and trying to recruit us." Thereafter, Pope adopted the habit of referring to Talon as the "new hospital" and Security Title as the "old hospital."³

¶ 13 Another department head, Joyce Westfall, testified that Pope called her into her office and asked her if she would go with Pope if Pope took a position with a different company. Westfall said yes. The jury heard deposition testimony in which Westfall testified that Pope told her she would have a job at the new company if she followed her. Westfall also testified that one day in early October she heard the "old hospital"/"new hospital" code used at a meeting of ten or 15 department heads, and that everyone seemed to know what was being talked about.

¶ 14 Gilda Ruiz, another Branch 66 employee, testified that in early October, Pope told her she was leaving Security Title and going to work for a different company and that Ruiz could go with Pope. Pope told her during this conversation that Ruiz would make more money, would get a signing bonus and would have better benefits at the other company. Pope also told Ruiz that she was taking the Fulton Homes account with her.⁴

¶ 15 The jury also heard deposition testimony in which Pope acknowledged she discussed her departure plans during Branch 66 department-head meetings. Pope also testified that between the two of them, she and Tucker talked to most of the Branch 66 employees about moving and they all agreed to go...