Palmer v. Diaz

• Decision Date: 14 May 2009
• Docket Number: No. 08CA0198.,08CA0198.
• Citation: 214 P.3d 546
• Parties: Richard PALMER, Plaintiff-Appellant, v. Chuck DIAZ, Diane Herwitz, and Sandra Burrill, Defendants-Appellees.
• Court: Colorado Court of Appeals

214 P.3d 546

Richard PALMER, Plaintiff-Appellant, v. Chuck DIAZ, Diane Herwitz, and Sandra Burrill, Defendants-Appellees.

No. 08CA0198.

Colorado Court of Appeals, Div. V.

May 14, 2009.

Walberg, Tucker & Holmes, P.C., Wendelyn K. Walberg, Kristin A. Brenner, Englewood, Colorado, for Plaintiff-Appellant.

White and Steele, P.C., Stephen R. Higgins, Denver, Colorado, for Defendants-Appellees.

Opinion by Judge GRAHAM.

Plaintiff, Richard Palmer, a businessman, appeals the judgment and award of damages entered after a jury trial in favor of defendants, Chuck Diaz, Diane Herwitz, and Sandra Burrill, witnesses who provided information about Palmer to federal investigators. Palmer also appeals the trial court's order awarding attorney fees and costs to defendants. We affirm the judgment except as to the award of exemplary damages, reverse the order awarding attorney fees and costs, and remand for further proceedings.

Palmer was a founder, director, and, at different times, corporate vice president, vice president of sales, and chief executive officer of Native American Sales, Incorporated (NAS), which primarily sold computer equipment to the United States government under the Small Business Act of 1958.

Robert Ruthford, who was part Native American, was listed as the owner of NAS. NAS was therefore granted minority status under section 8(a) of the Small Business Act, 15 U.S.C. § 637(a). Defendants all worked for NAS at various times.

In December 1997, after he was no longer employed by NAS, Diaz contacted the Small Business Administration "because he did not want to see NAS take advantage of the 8(a) program." Diaz explained that, although "on paper" Ruthford was "the 96% owner of NAS," Palmer was the "real owner." Thereafter, the Federal Bureau of Investigation, the Internal Revenue Service, and Small Business Administration investigated NAS. Defendants cooperated with the federal government in the investigation of Palmer. Palmer had filed for Chapter 13 bankruptcy protection in 1995 and received a discharge in 1998.

As a result of the investigation, Palmer was indicted in federal district court on ninety-one felony counts of money laundering, bankruptcy fraud, and criminal forfeiture. The indictment did not include charges or allegations related to NAS's minority status under section 8(a) of the SBA. Defendants were potential witnesses for the prosecution at Palmer's trial. Palmer ultimately pleaded guilty in federal district court to one count each of fraudulently concealing property in connection with a bankruptcy proceeding, money laundering, and criminal forfeiture. He was sentenced to the United States Bureau of Prisons for twenty-four months.

After Palmer pleaded guilty, he filed this slander and defamation action against defendants, alleging that defendants made defamatory statements to federal investigators "regarding [his] business practices and personal life," which concerned "the status of [NAS] within the SBA Minority business program 8(a)," and that these false statements led to additional investigations by the FBI and ultimately to Palmer's indictment, plea, and incarceration. Defendants denied that the statements were false and, for affirmative defenses, asserted substantial truth and a qualified privilege to publish the statements. Defendants also filed counterclaims for abuse of process and extreme and outrageous conduct, alleging that Palmer's action was in retaliation for defendants' cooperation with the federal government's criminal investigation of Palmer.

After a trial, the jury returned verdicts in favor of defendants on Palmer's slander claims and defendants' counterclaims for abuse of process and outrageous conduct. In connection with the abuse of process and outrageous conduct claims, the jury found that Palmer engaged in malicious (outrageous) conduct. The jury also determined by special interrogatory that Palmer's claims were brought against defendants as a result of retaliation. The jury awarded each defendant $100,000 in economic damages, $200,000 in noneconomic damages, and $1,500,000 in punitive damages. Palmer's and defendants' post-trial motions were denied.

Thereafter, the trial court awarded attorney fees in the amount of $43,422.38 in favor of defendants and against Palmer pursuant to section 18-8-708, C.R.S.2008, of the Victim and Witness Protection Act and section 13-17-102, C.R.S.2008. This appeal followed.

I. Sufficiency of the Evidence

Palmer argues that the evidence does not support the jury's verdict for defendants on their abuse of process and outrageous conduct claims. We are not persuaded.

In determining whether a jury verdict is supported by the evidence, we review the record in the light most favorable to the prevailing party, and every inference fairly deducible from the evidence is drawn in favor of the judgment. Appellate courts are bound by a jury's findings and may not disturb a jury verdict unless it is clearly erroneous. People in Interest of T.T., 128 P.3d 328, 331 (Colo.App.2005).

A claim for abuse of process requires a plaintiff to prove the following elements: (1) an ulterior purpose for the use of judicial process; (2) willful action in the use of that process which is not proper in the regular course of the proceedings, that is, use of a legal proceeding in an improper manner; and (3) resulting damage. Hewitt v. Rice, 154 P.3d 408, 414 (Colo.2007); Moore v. W. Forge Corp., 192 P.3d 427, 438 (Colo.App. 2007); Walker v. Van Laningham, 148 P.3d 391, 394 (Colo.App.2006).

The elements of outrageous conduct are: (1) the defendant engaged in extreme and outrageous conduct, (2) recklessly or with the intent of causing the plaintiff severe emotional distress, and (3) causing the plaintiff severe emotional distress. Archer v. Farmer Bros. Co., 70 P.3d 495, 499 (Colo. App.2002), aff'd, 90 P.3d 228 (Colo.2004).

The trial court instructed the jury on these elements without objection. See CJI-Civ. 4th 17:10, 23:1 (1998).

In addition, because defendants' claims for abuse of process and outrageous conduct were based on the allegation that Palmer filed this lawsuit solely for retaliatory purposes, the court instructed the jury, without objection, on the definition of "retaliation" as follows:

An individual commits "retaliation" against a witness if such person uses a threat, act of harassment, or act of harm or injury upon any person or property, which action is directed to or committed upon a witness to any crime with the specific intent to retaliate or to seek retribution against that person because of that person's relationship to a criminal proceeding.

Palmer agrees this instruction tracked the statutory language of section 18-8-706(1), C.R.S.2008.

On appeal, Palmer argues that the evidence failed to establish that the act of filing this lawsuit constituted a prohibited, or an unlawful, act of retaliation pursuant to section 18-8-706(1). Palmer's argument regarding the sufficiency of the evidence is intertwined with, and dependent upon, his argument that the instruction defining "retaliation" was erroneous because it failed to instruct the jury that an "act of harm or injury" or an "act of harassment" includes only unlawful and prohibited acts. However, because Palmer did not object to the jury instructions at trial, and in fact agreed to the jury instructions, we decline to address this new argument. See C.R.C.P. 51 (stating that the parties must object to jury instructions prior to their submission to the jury, and that "[o]nly the grounds so specified shall be considered on ... appeal or certiorari"); Bear Valley Church of Christ v. DeBose, 928 P.2d 1315, 1330-31 (Colo.1996); J.A. Balistreri Greenhouses v. Roper Corp., 767 P.2d 736, 739 (Colo.App.1988).

We conclude that the evidence, when viewed in the light most favorable to defendants, supports the jury's verdict that Palmer used the judicial proceedings for the ulterior purpose of retaliation for defendants' cooperation in the federal investigation. Palmer filed the lawsuit after he entered his guilty plea and was sentenced, but before he began serving his sentence. Palmer alleged in the complaint—which is available to the public—that defendants lied to federal law enforcement authorities. Defendants testified that they believed that this was a "vindictive" lawsuit filed for "retaliatory purposes." The Assistant United States Attorney, who was involved in the investigation and prosecution of Palmer, testified that he was "shocked" Palmer was suing defendants and that he had "never heard of any witnesses getting sued in a manner like this either on any of [his] cases or on any other cases with which [he] was familiar."

The instruction on abuse of process included as an element that the "principal reason for [Palmer]'s action was other than to recover damages but rather to retaliate and intimidate witnesses and cause them damage for cooperation with the Federal government in criminal proceedings that involve [Palmer]." Based on the evidence and inferences therefrom, the jury reasonably could find that Palmer's motivation in filing the lawsuit did not relate to any expectation of recovery referenced in the instruction. In returning a verdict against Palmer, the jury necessarily concluded that Palmer himself was pursuing the claims for ulterior purposes and not because he believed the claims were meritorious. Indeed, the jury found against Palmer on his slander claims.

We also reject Palmer's argument that, because the trial court did not direct a verdict in favor of defendants on their outrageous conduct claim, the evidence is somehow insufficient to support the jury's verdict that filing this lawsuit constituted outrageous conduct.

A motion for directed verdict may be granted only where the evidence, considered in the light most favorable to the nonmoving party, compels the conclusion that reasonable people could not disagree and that no evidence, or legitimate inference from the...