Dombey v. Phoenix Newspapers, Inc.

• Decision Date: 31 July 1986
• Docket Number: No. 18122-PR,18122-PR
• Citation: 724 P.2d 562,150 Ariz. 476
• Parties: , 13 Media L. Rep. 1282 Dale K. DOMBEY, and Billie Jo Dombey, his wife; and Dombey, Inc., an Arizona corporation, Plaintiffs-Appellees, v. PHOENIX NEWSPAPERS, INC., an Arizona corporation; and Bill Ahrens, Defendants- Appellants.
• Court: Arizona Supreme Court

Page 562

724 P.2d 562

150 Ariz. 476, 13 Media L. Rep. 1282

Dale K. DOMBEY, and Billie Jo Dombey, his wife; and Dombey, Inc., an Arizona corporation, Plaintiffs-Appellees, v. PHOENIX NEWSPAPERS, INC., an Arizona corporation; and Bill Ahrens, Defendants- Appellants.

No. 18122-PR.

Supreme Court of Arizona.

July 31, 1986.

Reconsideration Denied Sept. 23, 1986.

Marton & Hall, P.A. by Kraig J. Marton, and Andrews, Marenda & Moseley, P.A. by William S. Andrews, and Goodson & Allen, Ltd. by John F. Goodson, Phoenix, for plaintiffs-appellees.

Gust, Rosenfeld, Divelbess & Henderson by James F. Henderson, Jeffrey A. Ekbom, Phoenix, for defendants-appellants.

FELDMAN, Justice.

This case arises from a series of allegedly defamatory newspaper articles in The Arizona Republic, a newspaper published by Phoenix Newspapers, Inc. (defendants). The articles asserted, inter alia, that plaintiff Dale Dombey (Dombey) had engaged in various improprieties while acting as the insurance agent of record for Maricopa County. At trial, the jury found the statements to be false and defamatory. The court of appeals affirmed Dombey's judgment but ordered a new trial on the issue of damages for his company, Dombey, Inc. Dombey v. Phoenix Newspapers, Inc., 147 Ariz. 61, 708 P.2d 742 (App.1985). Because of important first amendment questions, we granted review on some of the issues. Rule 23, Ariz.R.Civ.App.P., 17A A.R.S. We have jurisdiction pursuant to Ariz. Const. art. 6, § 5(3) and A.R.S. § 12-120.24.

ISSUES

The trial judge ruled that Dombey was a private figure and that he might, therefore, recover compensatory damages upon a showing of negligence, while presumed and punitive damages could be recovered only upon a showing of actual malice. Concluding that the evidence was insufficient to support a claim of actual malice, the trial judge instructed the jury on negligence but not on punitive damages. The jury awarded compensatory damages, thus finding that the publications were false and defamatory and that defendant newspaper and defendant reporter had been at least negligent in publishing the articles.

Defendants claim that the court erred in its private figure ruling. They argue that Dombey was either a public official or a public figure, and the jury should have been instructed, therefore, that no recovery was allowed absent a showing of actual malice. Dombey maintains that he was a private figure and thus no error was committed when the compensatory damage issue was submitted to the jury on a negligence standard. In addition, Dombey claims that the private figure argument has been waived and should not be considered by this court.

FACTS

In 1964 the Maricopa County Board of Supervisors appointed Dombey the county's insurance agent of record for health and life insurance. In that capacity, Dombey implemented and serviced life and health insurance programs covering county employees. When Dombey was first appointed, county employees had no group insurance. He lobbied for such programs and, after a plan was instituted, continued to push for improvements. As "agent of record" he was not a county employee and was not paid by the county. Instead, compensation was received in the form of commissions paid directly by the insurance carriers. The agent of record served at the will of the Board of Supervisors; Dombey held the position from 1964 until he resigned in August, 1979, subsequent to publication of the articles. He testified that he had worked hard to obtain and retain his position as agent of record. Periodically he fended off attempts by others who wanted The Board of Supervisors had final legal authority over insurance and voted to accept or reject plans proposed by Dombey or the insurance committee. Regardless of which plan was accepted, Dombey would receive a commission. However, testimony of Board members indicated that they relied on their "experts", and rarely undertook any independent investigation. The Board's primary concerns were budgetary. When it rejected a proposal Dombey had made, it was usually because an increased expenditure of county funds was required. By 1978, the county budgeted and spent $2.7 million annually for its share of premiums on employee life and health insurance plans, generating annual gross commissions to Dombey or Dombey, Inc. in excess of $55,000.

[150 Ariz. 478] the job for the commissions it generated. Indeed, between 1970 and 1978 Dombey or his companies received over $228,000 in gross commissions from health and life insurance alone, the bulk of it after 1976.

In 1973, Dombey proposed that deferred compensation plans as well as health and life insurance should be offered to county employees. The Board of Supervisors ultimately adopted his proposal because it benefitted the county's employees and cost the county nothing, as all contributions came from the employees themselves. The plans underwent a number of changes and modifications over the years as various options were added or removed. Dombey was appointed to an unpaid position on a five-member Deferred Compensation Committee and was made the plan administrator; this entitled him to a commission on all plan contributions made by employees.

Dombey was committed to enhancing the various options for the deferred compensation plan and worked hard to develop and maintain a good program. In order to prevent improprieties, he also did his best to insulate himself and his employees from actual contact with the money. Thus, all funds contributed by employees were paid directly to the banks or insurance companies offering the plans, which then paid Dombey his commissions. There were three basic types of plans: a savings plan with Valley National Bank; a mutual fund with Manequities; and a series of annuities and a combination life insurance/investment vehicle with ITAC, a subsidiary of a major insurance company. These plans all paid different commissions. From 1973 to 1978 Dombey, Inc. earned $59,464 in gross commissions from deferred compensation, the bulk of it from the ITAC plans.

Dombey used various corporate structures in his business. He first incorporated in the early 1970's as R.W. Grange, Limited. All the county commissions were paid to that company, of which Dombey was an employee. He also maintained a substantial private insurance business, although he spent a significant portion of his time doing county work. Fees from private customers also were paid to the corporation. Dombey later became associated with Wesley Arnold, selling him fifty percent of the stock in R.W. Grange. Shortly thereafter, Dombey had a heart attack and Arnold purchased the remaining shares of the corporation from Dombey with payments spread over ten years.

Dombey left, but he took his county business with him. He then established Dombey, Inc., which received all his county commissions. Dombey remained agent of record, and the Board of Supervisors dealt with him personally. In October, 1977 Dombey hired Donald Jones as a salesman, intending to train him and ultimately bring him into the business. The following month, Dombey suffered another major heart attack. He sold Dombey, Inc. to Jones, placing the stock in escrow until Jones performed on a buy-out agreement which entitled Dombey to receive diminishing percentages of the corporation's income over a ten-year period. While Dale Dombey no longer worked full-time after Jones took over the business, he did provide occasional consultations concerning the management of Dombey, Inc., proffered advice on specific insurance problems and referred clients. Dombey's name remained on the letterhead, he remained agent of record for Maricopa County life and health Dombey also made arrangements with Jones and Arnold to receive a portion of any commissions generated by referrals from private customers. Dombey presently owns all the stock in Dombey, Inc.; county income ceased after he resigned as agent of record and, in effect, Jones returned the business to him.

[150 Ariz. 479] insurance, and he was still plan administrator for the county's deferred compensation program.

The eighteen articles upon which Dombey brought suit were published in The Arizona Republic ¹ in March and April of 1979. Initially, the articles concerned conflict of interest allegations against then County Manager Charles Miller. Dombey was first named as an investment partner and longtime friend of Miller's, as well as the man in "control" of Maricopa County's life and health insurance programs. Subsequent articles implied that Dombey had made excessive commissions from the various programs he administered, that he had "kept" employees' investment funds and that he was under investigation by a grand jury. At trial these allegations were found to be false and defamatory, and the record clearly supports that finding.

The articles had their inception in the confusion surrounding the county insurance business prior to the time of publication. Apparently there was an ongoing grand jury investigation into fraud in the county casualty insurance program, which was administered by a different agent of record and was completely unrelated to Dombey's activities. At the same time, County Manager Miller came under investigation for alleged improprieties. While reading county records, a reporter for the Republic, Mr. Seper, noticed that Miller, Dombey and a county employee were all limited partners in several limited partnerships. Seper telephoned the various parties involved, including Dombey, and conducted an investigation which resulted in the publication of the March 11, 1979 article about potential conflicts of interest. At about this same time, the Board of Supervisors asked the county attorney to investigate Miller. It is unclear whether this investigation was begun before or after the articles were written. In any event, the county attorney later reported that there was no evidence of illegality. The Board of Supervisors also hired the Wyatt...