Southern Union Co. v. Southwest Gas Corp.

Decision Date13 July 2005
Docket NumberNo. 03-16649.,No. 03-16729.,03-16649.,03-16729.
PartiesSOUTHERN 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, 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-Appellee.
CourtU.S. Court of Appeals — Ninth Circuit

Tom Q. Ferguson, Tulsa, OK, for plaintiff-appellee-appellant Southern Union Company.

Barry Richard, Tallahassee, Florida, Elliot H. Scherker, Miami, FL, E. Jeffrey Walsh and Robert A. Mandel, Greenberg Traurig, P.A., Phoenix, AZ, and Julissa Rodriguez, Greenberg Traurig, P.A., Miami, FL, for defendant-appellant-appellee James M. Irvin.

Appeal from the United States District Court for the District of Arizona; Roslyn O. Silver, District Judge, Presiding. D.C. Nos. CV-99-01294-ROS, CV-00-00119-ROS, CV-00-00452-ROS, CV-00-01812-ROS, CV-00-01775-ROS.

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 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 early next week.

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 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.

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 27, 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) If a party timely files in the district court any of 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 ...

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 27, 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).

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 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...

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