Action Marine, Inc. v. Continental Carbon Inc.

• Citation: 481 F.3d 1302
• Decision Date: 21 March 2007
• Docket Number: No. 06-11311.,06-11311.
• Parties: ACTION MARINE, INC., John Tharpe, et al., Plaintiffs-Appellees, v. CONTINENTAL CARBON INCORPORATED, China Synthetic Rubber Corporation, Defendants-Appellants.
• Court: United States Courts of Appeals. United States Court of Appeals (11th Circuit)

481 F.3d 1302

ACTION MARINE, INC., John Tharpe, et al., Plaintiffs-Appellees, v. CONTINENTAL CARBON INCORPORATED, China Synthetic Rubber Corporation, Defendants-Appellants.

No. 06-11311.

United States Court of Appeals, Eleventh Circuit.

March 21, 2007.

Evan M. Tager, Nickolai Gilford Levin, Mayer, Brown, Rowe & Maw, LLP, Washington, DC, Clifford C. Brady, Brady, Radcliff & Brown, LLP, Mobile, AL, Peter Sean Fruin, H. Thomas Wells, Jr., Maynard, Cooper & Gaie, P.C., Birmingham, AL, Justin Brett Busby, Mayer, Brown, Rowe & Maw, LLP, Houston, TX, for Defendants-Appellants.

David B. Byrne, III, Beasley, Allen, Crow, Methuin, Portis & Miles, P.C., Rhon E. Jones, Beasley, Wilson, Allen, Main & Crow, P.C., Montgomery, AL, Edward R. Jackson, Jackson, Fikes, Hood & Brakefield, James C. Brakefield, Tweedy, Jackson, Beech & Fikes, Jasper, AL, Jeffrey Edwin Friedman, P. Thomas Dazzio, Jr., Lee T. Patterson, Friedman, Leak & Bloom, P.C., Birmingham, AL, for Plaintiffs-Appellees.

Thomas Henderson Dupree, Jr., Gibson, Dunn & Crutcher, LLP, Washington, DC, for Amicus Curiae.

Appeals from the United States District Court for the Middle District of Alabama.

Before DUBINA and WILSON, Circuit Judges, and CORRIGAN,^* District Judge.

DUBINA, Circuit Judge:

Appellants, Continental Carbon Co., Inc. ("CCC"), and its parent company, China Synthetic Rubber Corp. ("CSRC") (collectively, "Continental"),¹ defendants in the underlying lawsuit, appeal the district court's denial of their post-trial motion for judgment as a matter of law or, in the alternative, a new trial or, in the alternative, an amendment of the final judgment (hereinafter "post-trial motion"). Having reviewed the parties' briefs and the evidence in the record, and with the benefit of oral argument, we affirm the district court's order and the judgment entered on the jury's verdict.

I. BACKGROUND

A. Facts

Continental owns and operates a manufacturing plant in Phenix City, Alabama, that produces carbon black, a substance the company describes as follows:

a highly engineered product manufactured by heating feedstock oil to a high temperature in a low-oxygen reactor. The resulting product is smoke that includes both carbon black and waste gases. The carbon black is separated from the gases, processed, and formed into small pellets for ease of handling and shipment. [Continental] sells carbon black for use in making tires, rubber and plastic items, inks, and other . . . products.

[Appellants' Br. at 3 (citations to the record omitted)].

According to trial testimony, the separating process occurs in stages using filters located in what is known in the industry as bagfilter compartments. Pressurized smoke carries carbon black through the compartments, where the bagfilters capture the carbon black. In a closed system such as exists in the Phenix City plant, if everything is working perfectly, no carbon black should escape, and the remaining gasses are expelled through exhaust towers.

Originally, the Phenix City plant housed one production unit ("Unit 1"). Although Continental received complaints from neighboring property owners regarding carbon black emissions from this unit, the damage giving rise to the present lawsuit occurred in conjunction with Continental's efforts to double the plant's production by commissioning a second unit in 1999 ("Unit 2"). Along with the construction of Unit 2, Continental installed a thermal oxidizer for the purpose of combusting any carbon black particles that escape either production unit before the air emanating from the bagfilter compartments is expelled.

The appellees (collectively, "the property owners"), which include the City of Columbus, Georgia ("the City"), own property located across the Chattahoochee River and within approximately 1½ miles from Continental's Phenix City plant.² The property owners, all of whom are Georgia citizens, also include Action Marine, Inc. ("Action Marine"), which during the relevant time operated a retail boat sales and maintenance business along the river; John Tharpe ("Tharpe"), Action Marine's sole shareholder and principal agent; and Owen Ditchfield ("Ditchfield"), who owns a residence and rental home in the area.

According to the property owners, the Phenix City plant repeatedly emitted carbon black into the air, which then carried the pollutant, known to be oily, adhesive, and penetrating, onto their properties, thereby darkening them. Specifically, the City contends that the carbon black damaged the Columbus Civic Center both externally and internally via the facility's air intake system. Other City-owned properties allegedly damaged include recreational facilities located in the City's South Commons Sports and Entertainment Complex as well as Rigdon Park. In pursuing this civil action, the City sought damages for cleanup and monitoring costs. Ditchfield sought damages for cleanup costs, diminution of property value, and emotional distress in connection with carbon black contamination of both of his properties.

Action Marine alleges that the carbon black damaged its inventory of boats to such an extent that the company was forced to sell those it could at a loss. Creditors eventually repossessed Action Marine's boat inventory, which Tharpe had personally guaranteed, and the business shut down. Action Marine sought damages to recover for the lost value of its business.

When Action Marine's creditors failed to recoup all that was owed from the company, they pursued deficiency judgments against Tharpe personally. To make matters worse, unable to return customers' boats in a clean condition and thought by some to be selling used boats as new, Tharpe became the butt of jokes among the fishermen who had formerly patronized his business. Tharpe therefore sought damages for emotional distress and loss of reputation.

Importantly, the property owners accused Continental of intentionally damaging their properties. They claimed that Continental chose to continue operating its Phenix City plant despite knowing that the plant's constant leaks were polluting their properties. Rather than fix the leaks, the property owners contend, Continental engaged in a strategy of denial, deception, and subterfuge. Therefore, the property owners sought punitive damages.

B. Procedural History

Alleging diversity jurisdiction pursuant to 28 U.S.C. § 1332 (2000), Action Marine and Tharpe originally filed this lawsuit as a class action stating common law tort claims of negligence, wanton conduct, breach of duty to warn, fraud, misrepresentation, deceit, nuisance, trespass, and strict liability. In addition to Continental, named defendants included Taiwan Cement Corp. ("Taiwan") as well as Charles Barry Nicks ("Nicks") and Todd Miller ("Miller"), both individually and in their representative capacity as agents of Continental.

Eventually, the City, Ditchfield, and Phillips Homes, Inc. ("Phillips"), were added as plaintiff class representatives, but the district court subsequently denied class certification. The district court then granted summary judgment in favor of Taiwan and the individual defendants, Nicks and Miller, on all claims against them. The court also granted summary judgment in favor of the remaining defendants on the claims of fraud, misrepresentation, deceit, and strict liability as well as the City's and Action Marine's claims for emotional distress. Phillips stipulated to a dismissal of its claims without prejudice, and the remaining plaintiffs acquiesced in the dismissal of the claim alleging a breach of a duty to warn. Therefore, the lawsuit proceeded to trial on the property owners' claims of negligence, wanton conduct, nuisance, and trespass.

After a 10-day trial, an Alabama jury returned a verdict in favor of the property owners on all claims and determined that Continental's actions warranted punitive damages. The jury awarded compensatory damages in the amounts of $45,000 to Ditchfield; $100,000 to Tharpe; $570,000 to the City; and $1.2 million to Action Marine for a total of $1,915,000. The jury also awarded $1,294,000 in attorney fees and assessed punitive damages at $17.5 million.

Following entry of the final judgment on the jury's verdict, Continental timely filed its post-trial motion challenging the sufficiency of the evidence presented in support of the tort claims as well as the amount and propriety of the compensatory and punitive damages awarded. Prior to ruling on the motion, the district court determined that the property owners were entitled to permanent injunctive relief, to which the parties later consented. Approximately six months after entry of final judgment on the claims for injunctive relief, the district court denied Continental's post-trial motion. Continental now appeals that decision.³

II. ISSUES

1. Whether the evidence was sufficient to reasonably infer that carbon black was a cause-in-fact of the alleged discoloration.

2. Whether the evidence was sufficient to reasonably infer that Continental

acted with the mental state required by Georgia law to prove the property owners' claims and lift Georgia's statutory cap on punitive damages awards.

3. Whether the compensatory damages awarded to Action Marine were improper.

4. Whether Tharpe, as personal guarantor of Action Marine's debt and its principal agent, may pursue a claim against Continental for emotional distress and/or loss of reputation.

5. Whether the punitive damages award was unconstitutionally excessive.

III. STANDARDS OF REVIEW

We review the "denial of a motion for judgment as a matter of law de novo, and will reverse only if `the facts and inferences point overwhelmingly in favor of one party, such that reasonable people could not arrive at a contrary verdict.'" Flury v. Daimler Chrysler Corp., 427 F.3d 939, 945 n. 12 (11th Cir.2005), cert. denied, ___ U.S. ___, 126 S.Ct. 2967, 165 L.Ed.2d 950 (2006). De novo review is the proper standard also for reviewing the district court's denial of...