Robertson Oil Co., Inc. v. Phillips Petroleum Co., Civ. No. 86-2120.

• Decision Date: 05 November 1991
• Docket Number: Civ. No. 86-2120.
• Parties: ROBERTSON OIL COMPANY, INC., Plaintiff, v. PHILLIPS PETROLEUM COMPANY, Defendant.
• Court: U.S. District Court — Western District of Arkansas

779 F. Supp. 994

ROBERTSON OIL COMPANY, INC., Plaintiff, v. PHILLIPS PETROLEUM COMPANY, Defendant.

Civ. No. 86-2120.

United States District Court, W.D. Arkansas, Fort Smith Division.

November 5, 1991.

Julius Glickman, Glickman & Barnett, Houston, Tex., William R. Wilson, Jr., Wilson, Engstrom, Corum & Dudley, Little Rock, Ark., for plaintiff.

Neal Lehman, Phillips Petroleum Co., Bartlesville, Okl., Robert Jones, Jr., Jones, Gilbreath, Jackson & Moll, Fort Smith, Ark., Theodore B. Olson, Theodore J. Boutrous, Jr., Gibson, Dunn & Crutcher, Washington, D.C., William H. Sutton and Kevin A. Crass, Friday, Eldredge & Clark, Little Rock, Ark., for defendant.

MEMORANDUM OPINION

MORRIS SHEPPARD ARNOLD, District Judge.

This case is before the court for the third time. Plaintiff's complaint, filed in 1986, asserted numerous causes of action against Phillips Petroleum Company, and, in 1987, a jury awarded plaintiff $750,000 in actual damages and $5,000,000 in punitive damages. The court then entered judgment on the verdicts. In 1989, the Eighth Circuit Court of Appeals affirmed the judgment with respect to the compensatory award, but reversed the punitive award and remanded for a new trial on plaintiff's claims for negligence and fraud and on the prayer for punitive damages. See Robertson Oil Company, Inc. v. Phillips Petroleum Co., 871 F.2d 1368 (8th Cir.1989).

The following year, on retrial, a jury found for plaintiff on his claim for fraud and assessed punitive damages against Phillips in the amount of $4,000,000 on plaintiff's claim for intentional interference with contract and $4,000,000 on plaintiff's claim for fraud. On appeal, the Eighth Circuit affirmed this court in all aspects of the trial proceedings, but remanded the case for the limited purpose of reviewing the punitive damage verdicts in light of the Supreme Court's ruling in Pacific Mutual Life Insurance Co. v. Haslip, ___ U.S. ___, 111 S.Ct. 1032, 113 L.Ed.2d 1 (1991) (Haslip). See Robertson Oil Company, Inc. v. Phillips Petroleum Co., 930 F.2d 1342 (8th Cir.1991) (Robertson II). The Eighth Circuit ordered the court to "articulate its analysis under Arkansas law and to review the award under the criteria approved in Haslip ... as well as principles enumerated in the Arkansas cases." Robertson II, 930 F.2d at 1347.

I.

Under the law of the state of Arkansas, a trial court should allow an award of punitive damages to stand unless its 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, 49, 770 S.W.2d 656, 659 (1989), quoting from W.M. Bashlin Co. v. Smith, 277 Ark. 406, 423, 643 S.W.2d 526, 534 (1982). The first question that the court must address is whether these review criteria can pass muster under the reasoning in Haslip. It needs emphasizing that Haslip did not hold that the procedures that it approved, devices that the Alabama courts had developed over the years, are the minimum ones that the due process clause requires. Rather, the Court was careful to say simply that the Alabama procedure is constitutional because it "ensures meaningful and adequate review by the trial court whenever a jury has fixed the punitive damages." Haslip, ___ U.S. at ___, 111 S.Ct. at 1044.

In a case similar to the instant one, the Eighth Circuit expressed some reservations about the constitutionality of the Arkansas post-verdict review processes, see Union National Bank of Little Rock v. Mosbacher, 933 F.2d 1440 (8th Cir.1991), because the Arkansas Supreme Court has asserted that "`considerable discretion is given to the jury in fixing punitive damages in an amount it deems appropriate to the circumstances.'" Id. at 1448, quoting from Walt Bennett Ford v. Keck, 298 Ark. 424, 429, 768 S.W.2d 28, 31 (1989). This court believes, however, that the Arkansas shock-the-conscience standard is not nearly so vague, elastic, and subjectively visceral as it might at first appear.

In the first place, this very standard has been employed by courts for as long as we have been a country, for it appeared in early equity cases where the chancellor was asked to set aside a bargain on the ground that consideration was grossly inadequate. See, e.g., Underhill v. Horwood, 10 Ves.Jun. 209, 32 Eng.Rep. 824 (1804), and Coles v. Trecothick, 9 Ves.Jun. 233, 32 Eng.Rep. 592 (1804), both cited and followed in Eyre v. Potter, 56 U.S. (15 How.) 42, 59-60, 14 L.Ed. 592 (1853). The same collection of words has since done reputable duty in a wide variety of contexts, serving, for instance, to evaluate the constitutionality of pumping a suspect's stomach to obtain swallowed drugs, see Rochin v. California, 342 U.S. 165, 72 S.Ct. 205, 96 L.Ed. 183 (1952), or, generally, as a measure of what the fifth and fourteenth amendments to the Constitution require. See, e.g., Moran v. Burbine, 475 U.S. 412, 106 S.Ct. 1135, 89 L.Ed.2d 410 (1986); Whitley v. Albers, 475 U.S. 312, 106 S.Ct. 1078, 89 L.Ed.2d 251 (1986) (cruel and unusual punishment); and Breithaupt v. Abram, 352 U.S. 432, 77 S.Ct. 408, 1 L.Ed.2d 448 (1957) (blood tests). The shock-the-conscience criterion has even been employed in considering whether the contract clause of the Constitution has been violated. See Gelfert v. National City Bank, 313 U.S. 221, 61 S.Ct. 898, 85 L.Ed. 1299 (1941), and Home Building and Loan Association v. Blaisdell, 290 U.S. 398, 54 S.Ct. 231, 78 L.Ed. 413 (1934).

The long and distinguished history of the Arkansas standard bears testimony to its utility and constitutionality. It is important, too, that that standard evidently has its genesis in a context in which the asserted unfairness of an act was resolved with reference to a relatively quantitative question, namely, whether an amount of money was grossly in excess of some other sum that could be determined with relative certainty. While the abstractly correct amount of punitive damages in any situation cannot be ascertained with a mathematical precision, the Arkansas standard is not nearly so subjective as defendant urges.

Secondly, an examination of the Arkansas cases reveals that the Arkansas Supreme Court has given its standard a rather definite shape and texture, for it has engaged in a number of rather specific inquiries under the aegis of its general standard. For example, the court 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. See Walt Bennett Ford, Inc. v. Keck, 298 Ark. 424, 768 S.W.2d 28 (1989); First Commercial Bank v. Kremer, 292 Ark. 82, 728 S.W.2d 172 (1987); Twin City Bank v. Isaacs, 283 Ark. 127, 672 S.W.2d 651 (1984); Pursley v. Price, 283 Ark. 33, 670 S.W.2d 448 (1984); Matthews v. Rodgers, 279 Ark. 328, 651 S.W.2d 453 (1983); Ray Dodge, Inc. v. Moore, 251 Ark. 1036, 479 S.W.2d 518 (1972); Holmes v. Hollingsworth, 234 Ark. 347, 352 S.W.2d 96 (1961); Vogler v. O'Neal, 226 Ark. 1007, 295 S.W.2d 629 (1956); McGlone v. Stokes, 193 Ark. 1008, 104 S.W.2d 191 (1937); St. Louis Southwestern Railway Co. v. Hagler, 160 Ark. 543, 254 S.W. 1071 (1923); Gordon v. McLearn, 123 Ark. 496, 185 S.W. 803 (1916); and Pine Bluff and Arkansas River Railway Co. v. Washington, 116 Ark. 179, 172 S.W. 872 (1915). Under these circumstances, a party that argues that the Arkansas procedure, as actually practiced, lacks a discernible perimeter or possesses insufficient form to pass constitutional muster has a difficult burden to carry. The court is clear that the review procedure "ensures meaningful and adequate review by the trial court," Haslip, ___ U.S. ___, 111 S.Ct. at 1044, and thus satisfies the due process clause.

Finally, it needs to be said that despite the moral skepticism of our age, its fascination with utilitarianism, and its tendency to apotheosize the work of the counting sciences, judging still requires judgment. Using judgment is not, as Holmes remarked in another context, a duty; it is merely a necessity. That there is some risk inherent in the enterprise does not distinguish it from any other human undertaking and cannot excuse a refusal to engage in it.

II.

The court turns now to an application of the criteria developed by the Arkansas Supreme Court. In our case, not merely one jury but two, each composed of twelve people, have unanimously concluded that it was appropriate to award punitive damages in relatively similar amounts against defendant, a circumstance that itself must naturally produce reluctance on the part of the court to disturb the relevant findings. The juries, on sufficient proof, have found that Phillips committed two intentional torts against plaintiff, one of them fraud. The court held that a finding of fraud would, without more, support an award of punitive damages; and in any case, both torts were...