Locricchio v. Legal Services Corp.

• Decision Date: 09 December 1987
• Docket Number: 86-2066,Nos. 86-2042,s. 86-2042
• Citation: 833 F.2d 1352
• Parties: , 24 Fed. R. Evid. Serv. 242 Anthony P. LOCRICCHIO, Plaintiff-Appellee/Cross-Appellant, v. LEGAL SERVICES CORP., et al., Defendants-Appellants/Cross-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1352

833 F.2d 1352

9 Fed.R.Serv.3d 979, 24 Fed. R. Evid. Serv. 242

Anthony P. LOCRICCHIO, Plaintiff-Appellee/Cross-Appellant, v. LEGAL SERVICES CORP., et al., Defendants-Appellants/Cross-Appellees.

Nos. 86-2042, 86-2066.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted July 17, 1987.

Decided Dec. 9, 1987.

Jeremiah J. Kenney, Pamela Hobbs, Kitch, Saurbier, Drutchas, Wagner & Kenney, P.C., Detroit, Mich., for plaintiff-appellee/cross-appellant.

Lawrence R. White, Las Cruces, N.M., for defendants-appellants/cross-appellees.

Appeal from the United States District Court for the District of Hawaii.

Before KOELSCH, SNEED and TANG, Circuit Judges.

SNEED, Circuit Judge:

Anthony P. Locricchio sued the Legal Services Corporation (LSC) and certain of its employees, alleging interference with contract, defamation, interference with prospective contract, and intentional infliction of emotional distress. A jury awarded Locricchio $537,500. The district court granted judgment notwithstanding the verdict (JNOV) as to interference with prospective contract and accordingly reduced the award to $337,500. The district court also awarded Locricchio post-judgment interest. The litigants appeal and cross-appeal from virtually every aspect of the final judgment. We affirm in all respects.

I. FACTS AND PROCEEDINGS BELOW

From July 1, 1974 until September 23, 1978, Locricchio was the Executive Director of the Legal Aid Society of Hawaii (LASH). At the time he was terminated, Locricchio had an employment contract that ran until July 1, 1980 and could be terminated only for cause. LASH is a Hawaii non-profit corporation organized to provide legal counsel to the indigent. It receives 5% of its funds from private contributions, 45% from the Hawaii State Legislature, and 50% from LSC. LSC is a District of Columbia non-profit corporation. Jurisdiction is based on diversity.

This dispute has its origin in disagreements that arose between Locricchio and LASH staff in January 1978. It appeared that some LASH employees and perhaps Locricchio were misappropriating funds. Locricchio criticized LASH attorneys for their small caseloads. Fifty attorneys and staff employees of LASH signed a petition asking Locricchio to resign. Locricchio fired five attorneys. The Board of Directors of LASH placed Locricchio on administrative leave with full pay and benefits.

The Board organized hearings to review the charges against Locricchio. Meanwhile, LSC undertook its own investigation. It hired the accounting firm of Price Waterhouse to investigate charges of financial wrongdoing. Price Waterhouse prepared a report that, among other things, described the charges against Locricchio without saying whether they were true or false.

The Board's hearings began on March 21, 1978. A former Hawaii Supreme Court justice was the hearing officer. Locricchio and his lawyer stopped attending the hearings before the staff presented all of its charges against Locricchio. Shortly thereafter, a car struck and injured the hearing officer. The hearings were postponed while he recuperated. They resumed on August 14, but Locricchio did not attend. His lawyer moved for a continuance, which was denied. The hearing ended without Locricchio's having presented his case. ¹

Before the hearings ended, Charles Jones, then director of LSC's Office of Field Services, sent a telegram dated July 19 to the Board of LASH. The telegram described the history of financial mismanagement at LASH and referred to the Price Waterhouse report. It demanded that Locricchio and others be removed as a condition of further funding.

On September 5, the hearing officer issued his findings of fact. They described the relationship between Locricchio and his staff as "irretrievably broken" and criticized Locricchio for poor management and fiscal abuses. On September 23, the Board voted unanimously to terminate Locricchio's employment contract.

Locricchio filed this lawsuit against LSC on August 6, 1980. Its progress was languid. Not until April 12, 1983 did Locricchio file interrogatories and a request for documents. LSC for its part did not answer the interrogatories despite repeated requests. The district court imposed sanctions limiting LSC's discovery. E.R. at 55-56. LSC moved for summary judgment on August 8, 1985. The court denied the motion on November 15. After trial, the jury awarded Locricchio $537,500: $87,500 for interference with contract, $200,000 for interference with prospective contract, $150,000 for defamation, and $100,000 in punitive damages. The court granted JNOV with respect to the interference with prospective contract claim, approved the rest

of the award, and granted Locricchio post-judgment interest. LSC appealed, and Locricchio cross-appealed, from those aspects of the judgment adverse to each. We affirm in all respects.

II. PARTIAL GRANT AND PARTIAL DENIAL OF JNOV

A. Standard of Review

LSC challenges the trial court's denial of its motion for JNOV as to the defamation and interference with contract claims. ² Locricchio, in turn, objects to the trial court's grant of LSC's motion for JNOV on his interference with prospective advantage claim. We determine the propriety of a JNOV under the same standard as that employed by the district court: whether the evidence, viewed in the light most favorable to the non-moving party, permits only one reasonable conclusion with respect to the verdict. Peterson v. Kennedy, 771 F.2d 1244, 1252 (9th Cir.1985), cert. denied, 475 U.S. 1122, 106 S.Ct. 1642, 90 L.Ed.2d 187 (1986). In reviewing the grant or denial of a motion for JNOV, we do not account for witness credibility, weigh evidence, or reach a different result simply because we feel it is more reasonable. Rinker v. County of Napa, 820 F.2d 295, 297 (9th Cir.1987).

B. LSC Challenge: Denial of JNOV with Respect to Interference with Contract Claim

LSC maintains that its conduct was justified and privileged. Its governing regulations do not support this. LSC is charged with attempting to achieve compliance with the Legal Services Corporation Act first "through informal consultation with the recipient [LASH]." 45 C.F.R. Sec. 1618.5(a) (1986). When LSC determines that a recipient has failed to comply with the Act to such an extent that it warrants a suspension of funding, LSC must serve a written preliminary determination of funding suspension upon the recipient with notice that the recipient can request an informal meeting to dispute the proposed suspension. 45 C.F.R. Sec. 1623.4 (1986). The July 19 telegram ordered LASH to fire Locricchio or risk losing LSC funding. This command was not an attempt at informal consultation, nor was it a preliminary determination of funding suspension. It was an ultimatum. We agree with the jury that LSC acted beyond the scope of its governing regulations in demanding Locricchio's discharge.

LSC insists that Locricchio must prove that a majority of the LASH board members were influenced by LSC in their decision to fire Locricchio. It relies on Hawaii's rule that an agency's decision is not vitiated by the vote of a member having an improper interest if the qualified majority of votes would have reached the same result. Waikiki Resort Hotel, Inc. v. City & County of Honolulu, 63 Haw. 222, 248-49, 624 P.2d 1353, 1371-72 (1981). However, this rule pertains to statutory disqualification, which is not an issue in this case. The rule is no authority for second-guessing the jury's determination that LSC influenced the LASH board's decision.

Finally, LSC objects to Simon Rosenthal's testimony that LSC did not follow proper procedures in demanding that Locricchio be fired. The grounds for LSC's objection to the Rosenthal testimony are unclear from its brief. Nevertheless, the trial court did not abuse its discretion by permitting Rosenthal to testify about LSC procedures. See Taylor v. Burlington N.R.R., 787 F.2d 1309, 1315-16 (9th Cir.1986). Rosenthal was testifying from his years of experience with LSC. Reporter's Transcript (R.T.), vol. 10, at 57-68. The jury could appropriately weigh his testimony.

Therefore, we affirm the trial court's denial of JNOV on this claim.

C. LSC Challenge: Denial of JNOV with Respect to Defamation Claim

LSC also contends it was surprised by much of the defamation testimony because it did not conform to the pretrial statement. We will not reverse a trial court's decision to admit evidence absent an abuse of discretion and some showing of prejudice. Kisor v. Johns-Manville Corp., 783 F.2d 1337, 1340 (9th Cir.1986). LSC did not suggest, far less show, how it was prejudiced.

LSC doubts whether a reasonable jury could find actual malice on the part of LSC employees who defamed Locricchio. Actual malice may be inferred. Beamer v. Nishiki, 66 Haw. 572, 586-87, 670 P.2d 1264, 1275 (1983). Our review of the trial record convinces us that there is ample evidence to support such an inference in this case.

D. Locricchio Challenge: Grant of JNOV on the Interference with Prospective Advantage Claim

The trial court granted JNOV on the prospective advantage claim at the behest of LSC because Locricchio failed to show that LSC acted with the necessary intent to interfere with any specific prospective economic relationship. E.R. at 884. We agree. Even viewing the evidence and reasonable inferences drawn therefrom in the light most favorable to Locricchio, he did not sustain his burden of proving the necessary elements of tortious interference with prospective advantage.

The elements are: (1) the existence of an economic relationship between the plaintiff and a third party that has the probability of ripening into a future economic benefit to the plaintiff; (2) knowledge by the defendant of the existence of the relationship; (3) intentional acts by the defendant designed to disrupt the relationship; (4) actual disruption of the relationship; and (5) damages proximately caused by the defendant's acts. Buckaloo v....