Continental Cas. Co. v. Southwestern Bell Telephone Co.

• Decision Date: 31 May 1988
• Docket Number: No. 86-1281,86-1281
• Citation: 860 F.2d 970
• Parties: CONTINENTAL CASUALTY COMPANY, an Illinois corporation, Plaintiff-Appellant, v. SOUTHWESTERN BELL TELEPHONE COMPANY, a Missouri Corporation, Defendant-Appellee.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 970

860 F.2d 970

CONTINENTAL CASUALTY COMPANY, an Illinois corporation Plaintiff-Appellant, v. SOUTHWESTERN BELL TELEPHONE COMPANY, a Missouri Corporation Defendant-Appellee.

No. 86-1281.

United States Court of Appeals Tenth Circuit.

May 31, 1988.

Rehearing Denied Oct. 18, 1988.

Michael Minnis of Pierson, Ball & Dowd (David McCullough of Pierson, Ball & Dowd, Oklahoma City, Okl., and David Machanic and Michael Curtis of Pierson, Ball & Dowd, Washington, D.C., with him on the brief), Oklahoma City, Okl., for plaintiff-appellant.

Andrew M. Coats of Crowe & Dunlevy (Larry E. Joplin, Wesley C. Fredenburg, and Robert G. McCampbell, with him on the brief), Oklahoma City, Okl., for defendant-appellee.

Before SEYMOUR and McWILLIAMS, Circuit Judges, and SAFFELS, District Judge ^*.

SAFFELS, District Judge.

Plaintiff/appellant Continental Casualty Company (CNA) filed this lawsuit against Southwestern Bell Telephone Company (Southwestern Bell), stating causes of action for libel and tortious interference with contract based on statements published by Southwestern Bell to the effect that CNA denied valid insurance claims on numerous occasions. Immediately prior to trial, the district court held that the statements were not libel per se, and the trial proceeded under a libel per quod theory. The jury subsequently returned a $21,423.00 compensatory damage verdict in CNA's favor on the tortious interference with contract claim, but it found for Southwestern Bell on the libel claim. CNA appeals the adequacy of the damages and alleges various errors by the trial court. For the reasons below, we reverse and remand for a new trial on several issues.

I.

In addition to using its own in-house labor, Southwestern Bell regularly employs independent contractors to place underground cable for new telephone users in the Oklahoma City, Oklahoma area. A prerequisite for receiving a cable-laying contract from Southwestern Bell is the purchase of insurance by the contractor to cover claims against the contractor or Southwestern Bell arising from the cable-laying operations. Southwestern Bell required all such independent contractors to purchase an Owner's and Contractor's Protective (OCP) policy. In an OCP policy, Southwestern Bell is the insured entity. The independent contractor was also required to purchase a General Liability (GL) policy, naming itself as the insured. Southwestern Bell required that the OCP and GL policies be issued by the same insurance carrier.

CNA was one of the insurance carriers that provided OCP and GL policies to Southwestern Bell's independent contractors. Southwestern Bell representatives testified at trial that from 1981 to 1983, they experienced difficulties in dealing with CNA, particularly in CNA's handling and approval of claims under the policies. In February 1983, Ken Felker, head of Southwestern Bell's claims department, wrote an internal memorandum to Bob White, chief of the plant division, in which he recommended that bids no longer be accepted from independent contractors who were insured with CNA. The memorandum contained the following remarks:

"Since the Claims Office opened for business in October, 1981, we have handled numerous cases where our outside contractors have damaged our customer's property. As a general rule, the insurance carriers for these contractors have responded promptly and resolved those claims that are legitimate.

One exception to this has been Continental Casualty Company (CNA). On numerous occasions they have denied valid claims, ignored claimants, refused to cooperate with us, etc. We have been exposed to potential lawsuits and our reputation as a responsible corporate citizen has been damaged because of CNA's attitude and methods.

For these reasons, we strongly recommend that bids no longer be accepted from contractors who are insured by CNA."

Plaintiff's Exh. 10. White repeated these statements verbatim in a memorandum distributed to various divisions within Southwestern Bell. Plaintiff's Exh. 6. Upon receiving the White memorandum in early March, 1983, the managers of several Southwestern Bell divisions sent letters to cable-laying contractors, informing them that bids would no longer be accepted from contractors who are insured by CNA. Some of these letters incorporated verbatim the language from the Felker and White memorandums. E.g., Plaintiff's Exh. 2.

Upon learning of Southwestern Bell's intent to cease accepting bids from contractors carrying insurance with CNA, many cable-laying companies canceled their CNA policies. Shortly thereafter, CNA filed the present lawsuit for damages arising from Southwestern Bell's allegedly libelous statements and its interference with contractual relations between CNA and its insureds. The jury found for CNA on its contractual interference claim, awarding it $21,423.00 in compensatory damages. The jury returned a verdict in Southwestern Bell's favor on the libel claim. CNA moved for a new trial on the issue of damages, claiming that the verdict was inconsistent with the evidence. CNA expressly reserved the right of appeal on other alleged errors. The district court denied the motion.

On appeal, CNA makes three principal arguments: (1) It is entitled to a new trial because the damage award was so low that the verdict was, on its face, inconsistent with the evidence; (2) The district court erred in finding that the statements contained in the memorandums and letters were not libel per se and in admitting certain evidence supporting Southwestern Bell's defense of truth; and (3) The district court erred in permitting a Southwestern Bell witness to testify, to qualify as an expert, and to use exhibits that were not listed in the pretrial order. We address these arguments in turn.

II.

CNA's first claim of error relates to the adequacy of the jury verdict on the tortious interference with contract claim. CNA contends that the amount of damages awarded by the jury on this claim was so low that the verdict was, on its face, inconsistent with the evidence at trial. CNA's branch manager, Bob Blessing, testified at trial that as a result of Southwestern Bell's damaging statements, CNA lost 467 insurance policies that generated $776,609 in annual premiums. R.Supp. Vol. VI at 419; Plaintiff's Exh. 53. The controller of CNA, Dennis Chookaszian, testified that Southwestern Bell's actions conservatively caused a loss of $1.159 million in profits, reduced to present value and assuming a ten-year renewal limit. R.Supp. Vol. VIII at 711-20; Plaintiff's Exh. 57. Southwestern Bell's own expert, John Fitzgerald, testified that, assuming liability, total damages should be a present value figure of $83,255. R.Supp. Vol. X at 1189-204. Fitzgerald used a five-year term but stated that three years would have been a more accurate period. Id. at 1204. Therefore, if the jury followed Fitzgerald's testimony, it could have awarded damages in the neighborhood of $55,000 to $83,255. The actual award was $21,423.00.

We have stated that "[a] motion for new trial on the grounds that the jury verdict is against the weight of the evidence normally involves a review of the facts presented at trial, and thus involves the discretion of the court." Black v. Hieb's Enter., Inc., 805 F.2d 360, 363 (10th Cir.1986). Our review focuses on whether the verdict is clearly, decidedly, or overwhelmingly against the weight of the evidence, with the trial court's decision to stand absent a showing of a manifest abuse of discretion. Id. "The amount of damages awarded by the jury can be supported by any competent evidence tending to sustain it, and '[o]ur appellate function is completed when we are convinced that an evidentiary basis in the record supports the jury's verdict.' " Id. (quoting Bennett v. Longacre, 774 F.2d 1024, 1028 (10th Cir.1985)). See also, Hudson v. Smith, 618 F.2d 642, 646 (10th Cir.1980) ("A jury's verdict regarding the amount of damages should be upheld unless it is clearly erroneous, or there is no evidence to support it.").

In its brief, CNA formally propounded only the argument that the verdict was against the weight of the evidence, but it also made statements to the effect that the verdict was "facially inadequate," which is a separate legal theory upon which to attack an award. A trial judge's determination of the adequacy of a jury award is also reviewed under the abuse of discretion standard. Black, 805 F.2d at 362. No abuse of discretion will be found "unless the verdict is so inadequate 'as to shock the judicial conscience and to raise an irresistible inference that passion, prejudice, corruption, or other improper cause invaded the trial.' " Id. (quoting Bennett v. Longacre, 774 F.2d 1024, 1028 (10th Cir.1985)). "Absent such a showing of passion or prejudice, the jury's finding on damages is considered inviolate." Black, 805 F.2d at 362.

The damage figure awarded by the jury is not so inadequate as to raise an inference of passion or prejudice, and CNA has offered no objective evidence in support of such a finding. Under the standard in Black, the court cannot find that the award is so inadequate as to require a new trial. But after a study of the record, the court has reached the inescapable conclusion that the jury's damage award is clearly, decidedly and overwhelmingly against the weight of the evidence, such that the trial judge abused his discretion in not granting a new trial. In arriving at this result, the court has considered each argument made by Southwestern Bell in support of the award and has found uncontroverted evidence to the contrary in the record.

Southwestern Bell first argues that because the contracts in question were of one year's duration, the jury could have returned a damage estimate as low as $17,227. Dr. Fitzgerald, defendant's expert, noted that although the independent contractors canceled CNA policies of approximately $775,000 in premium value shortly after the release of the disparaging...