Robertson Oil Co., Inc. v. Phillips Petroleum Co.

• Decision Date: 28 December 1993
• Docket Number: No. 91-3717,91-3717
• Citation: 14 F.3d 373
• Parties: ROBERTSON OIL COMPANY, INC., Appellee, v. PHILLIPS PETROLEUM COMPANY, Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 373

14 F.3d 373

62 USLW 2416

ROBERTSON OIL COMPANY, INC., Appellee, v. PHILLIPS PETROLEUM COMPANY, Appellant.

No. 91-3717.

United States Court of Appeals,

Eighth Circuit.

Submitted June 8, 1993.

Decided Dec. 28, 1993.

Theodore B. Olson of Washington, DC, for appellant.

Julius Glickman, Houston, TX, and James Jeans, Platte City, MO, for appellee.

Before MCMILLIAN, Circuit Judge, HEANEY, Senior Circuit Judge, JOHN R. GIBSON, FAGG, BOWMAN, WOLLMAN, MAGILL, BEAM, LOKEN and HANSEN, Circuit Judges, en banc.

JOHN R. GIBSON, Circuit Judge, with whom HEANEY, Senior Circuit Judge, MCMILLIAN, FAGG, WOLLMAN, and HANSEN, Circuit Judges, join; and with whom MAGILL, Circuit Judge, joins as to Part I.

Phillips Petroleum Company appeals from a district court ¹ order refusing to vacate two punitive damage awards--$4,000,000 for tortious interference with a business relationship and $4,000,000 for fraud--after the remand we ordered in Robertson Oil Co. v. Phillips Petroleum Co., 930 F.2d 1342 (8th Cir.1991). Phillips argues that the district court erred in reviewing the punitive damage awards by applying the Arkansas "shock the conscience" standard because that standard does not constrain the jury's discretion when awarding punitive damages so as to satisfy due process considerations. Phillips also argues that the two $4,000,000 awards are grossly disproportionate, arbitrary, capricious, and fundamentally unfair in violation of due process, duplicative, and an abuse of discretion, and that the jury's deliberations were impermissibly influenced by inflammatory evidence of Phillips' wealth. After a panel of this court affirmed the punitive damage awards, Robertson Oil Co. v. Phillips Petroleum Co., 14 F.3d 360 (8th Cir.1992), we granted Phillips' motion to rehear en banc and vacated the panel opinion. Robertson Oil Co. v. Phillips Petroleum Co., 14 F.3d 360 (8th Cir.1992). We received supplemental briefs from the parties and heard arguments, and we again affirm the punitive damage awards. ²

The case is before this court for the fourth time, and we need not repeat the underlying substantive facts which are set out in our first two decisions: Robertson Oil Co. v. Phillips Petroleum Co., 871 F.2d 1368, 1369 (8th Cir.1989) (Robertson I ); and Robertson Oil Co. v. Phillips Petroleum Co., 930 F.2d 1342 (8th Cir.1991) (Robertson II ). This court denied rehearing en banc in both Robertson I and Robertson II.

The first trial in this case resulted in verdicts against Phillips for fraud, negligence, and tortious interference with a business relationship; ³ an actual damage award of $750,000; and a punitive damage award of $5,000,000. Robertson I, 871 F.2d at 1369. We affirmed the tortious interference verdict, but reversed the negligence and fraud verdicts as inconsistent. Id. We upheld the actual damage award because it was based on only one injury, the loss of the Spe-Dee Mart account, and the tortious interference verdict established Phillips' liability for that injury. Id. at 1376. We struck the punitive damage award, however, because a jury must consider the defendant's conduct when it determines the amount to award, and the general verdict form in this case made it impossible for us to determine how much of the punitive damage award was based on the conduct the jury associated with each of its findings of liability. Id. We said that "[e]ach of these theories ... would support a different amount of punitive damages depending upon the conduct involved." Id. Some of the punitive damage award may have been based on the conduct underlying the negligence and fraud theories that were reversed. Id. Therefore, the case was remanded for retrial of the negligence and fraud claims and the punitive damage award. Id. at 1377.

The second trial resulted in a verdict against Phillips on the fraud claim, ⁴ and punitive damage awards of $4,000,000 for fraud and $4,000,000 for tortious interference. Robertson II, 930 F.2d at 1343. Phillips appealed again. Id. We rejected various claims of error, but because of the intervening United States Supreme Court decision in Pacific Mutual Life Insurance Co. v. Haslip, 499 U.S. 1, 111 S.Ct. 1032, 113 L.Ed.2d 1 (1991), we remanded with instructions for the district court to consider the propriety of the punitive damage awards under the principles of Haslip and Arkansas law. Robertson II, 930 F.2d at 1347.

On remand, the district court first analyzed the punitive damage awards under the Arkansas court's "shock the conscience" standard. This standard allows punitive damage awards to stand unless the amount shocks the conscience of the court or demonstrates that jurors were motivated by passion or prejudice. O'Neal Ford, Inc. v. Davie, 299 Ark. 45, 770 S.W.2d 656, 659 (1989). The district court studied the historical development of the "shock the conscience" standard and determined that the standard's "long and distinguished history ... bears testimony to its utility and constitutionality." Robertson Oil Co. v. Phillips Petroleum Co., 779 F.Supp. 994, 996 (W.D.Ark.1991). The court then examined Arkansas cases applying the standard and concluded that the Arkansas Supreme Court had enumerated a number of specific inquiries which gave the standard a definite "shape and texture." Id. The district court concluded that the standard was not too subjective and that the review criteria and procedures ensured a "meaningful and adequate review by the trial court" as required by Haslip, 499 U.S. at 20, 111 S.Ct. at 1044, and therefore, satisfied due process. 779 F.Supp. at 997. The district court then applied the Arkansas review criteria and allowed the awards to stand. Id. at 997-98. The case is now before us again, and the only issue is the propriety of the district court's review of the punitive damage awards under Arkansas law and Haslip. ⁵

I.

Phillips advances a multi-faceted argument that the Arkansas "shock the conscience" standard of review does not adequately constrain the discretion of juries to impose punitive damages so as to satisfy due process. Expanding this general argument, Phillips asserts that "standardless" and virtually unlimited jury discretion to punish and highly deferential judicial review of punitive damage verdicts render the Arkansas system constitutionally defective under Haslip. Phillips argues that application of the Arkansas standard of malice has been inconsistent and unpredictable, and that there is no fixed standard for the measurement of punitive damages or legislatively defined range. Phillips further argues that there is no reasonable relationship between the compensatory and punitive damage awards. Phillips then launches into a more specific attack on the "shock the conscience" standard, and asserts that federal courts applying Arkansas law have taken a broad brush approach to this standard. Phillips also argues that the Supreme Court approved the punitive damage system in Haslip because Alabama limited jury discretion and had a two layered post-verdict review procedure for evaluating the propriety of punitive damages. Finally, Phillips argues that the district court's application of the Arkansas "shock the conscience" standard was constitutionally flawed.

Phillips' broad based arguments fail to recognize the scope and nature of the district court's review of the punitive damage awards and, in truth, fail to recognize the review that Arkansas courts have made of punitive damage awards.

When the district court analyzed the punitive damage awards, it first considered the Arkansas "shock the conscience" standard and the question of whether jurors were motivated by passion and prejudice. 779 F.Supp. at 995-96. The court engaged in an historical analysis of the "shock the conscience" standard in Arkansas cases, as well as earlier English cases, and then examined the awards under the standard in Haslip. Id. at 996-98. The district court observed that the Arkansas Supreme Court has given the "shock the conscience" standard a "definite shape and texture" by engaging in a number of specific inquiries. Id. at 996. The district court stated:

For example, the [Arkansas Supreme C]ourt has examined the relationship between the relevant parties, the ratio of the punitive award to the compensatory award, the extent and duration of a defendant's acts, the deliberateness of the defendant's acts in the face of no justification for them, the defendant's motives, the defendant's remorse, if any, the defendant's net worth, and other matters, in order to judge the propriety of a punitive award. ⁶

Id. at 996-97. Applying these criteria, the district court observed that not one, but two juries had unanimously awarded punitive damages on findings that Phillips had committed two intentional torts, and that the ten-to-one ratio of punitive damages to actual damages did not suggest excessiveness in light of Phillips' net worth. Id. at 997. The district court rejected Phillips' assertion that Phillips' net worth triggered passion and prejudice on the part of the jurors, because evidence of net worth had not been allowed until the jury made a finding of liability and fixed the compensatory amount. Id. at 998. Finally, the court stated that the nervous and uncertain behavior of Phillips' witnesses could have caused a reasonable fact finder to believe that they were deliberately evasive and had guilty minds. Id.

It is evident that the district court considered not only whether the awards shocked the conscience or resulted from passion and prejudice, but also specifically recognized and discussed other factors that numerous Arkansas courts have considered in reviewing punitive damage awards. Id. 779 F.Supp. at 996-97. The district court's failure to discuss all the enumerated considerations does not mean that the other factors were not considered. We are satisfied that the district court's analysis properly recognized that although the Arkansas court's "shock the conscience" and passion and...