Simon v. Shearson Lehman Bros., Inc.

• Decision Date: 20 February 1990
• Docket Number: No. 87-8718,87-8718
• Citation: 895 F.2d 1304
• Parties: Alexander A. SIMON, Jr., Plaintiff-Appellant, Cross-Appellee, v. SHEARSON LEHMAN BROTHERS, INC., Michael W. Swofford, Defendants-Appellees, Cross-Appellants.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1304

895 F.2d 1304

Alexander A. SIMON, Jr., Plaintiff-Appellant, Cross-Appellee, v. SHEARSON LEHMAN BROTHERS, INC., Michael W. Swofford Defendants-Appellees, Cross-Appellants.

No. 87-8718.

United States Court of Appeals Eleventh Circuit.

Feb. 20, 1990.

Charles E. Campbell, Peter J. Quist, Robert Tayloe Ross, Hicks, Maloof & Campbell, Atlanta, Ga., for plaintiff-appellant, cross-appellee.

Peter J. Anderson, Louise Bailey Matte, Sara Anne Ford, Peterson, Young, Self & Asselin, Atlanta, Ga., Scott Eugene Daniel, Hilburn, Calhoon, Harper & Pruniski, Ltd., North Little Rock, Ark., for defendants-appellees, cross-appellants.

Appeal from the United States District Court for the Northern District of Georgia.

Before HATCHETT and CLARK, Circuit Judges, and FITZPATRICK ^*, District Judge.

CLARK, Circuit Judge:

This appeal arises from the district court's grant of a judgment notwithstanding the verdict (JNOV) or, in the alternative, a new trial, following a three and a half week jury trial involving claims of negligence, fraud and defamation. 665 F.Supp. 1555 (N.D.Ga.1987).

The complaint, filed by Alexander A. Simon Jr., (Simon), originally named as defendants Shearson Lehman Brothers, Inc., (Shearson), and certain of its employees: Michael W. Swofford, (Swofford), Peter T. Kujawski, (Kujawski), and Joseph Del Duca, (Del Duca). Pursuant to agreement, all defendants except Shearson and Swofford were eventually dismissed. Before trial, Shearson asserted counterclaims against Simon arising out of an alleged assignment of claims from the movie actor Burt Reynolds, (Reynolds).

Trial was held in the Northern District of Georgia in April and May of 1987. During the course of the trial the district court entered directed verdicts against both Simon and Shearson for all claims except Simon's claims of negligence, fraud and slander. The jury returned a verdict as follows: On the negligence claim arising out of the handling of Simon's commodities account, the jury found for Simon in the amount of $25,000.00; on the fraud claim based on willful misrepresentations made by a Shearson employee in the handling of Simon's commodities account, the jury found for Simon in the amount of $40,997.00 actual damages and $3,000,000.00 punitive damages; and on the slander claim, the jury found for Simon in the amount of $1,000,000.00, special damages, $1,000,000.00 general damages, and $5,000,000.00 punitive damages. Simon was forced to elect either the negligence award or the fraud award because they were duplicative awards based on alternate theories for the same harm, and along with the slander award, judgment was subsequently entered for Simon in the amount of $10,040,997.00.

In an order filed August 5, 1987 (Order), the district court granted Shearson's motion for a JNOV, and for a conditional new trial on Simon's slander claim. On Simon's fraud claim, the court denied Shearson's motion for a JNOV but granted its motion for a new trial and this issue has not been appealed. Simon filed notice that he was appealing the slander claim and Shearson subsequently filed a cross-appeal. The slander arose in a conversation between a Shearson official and Reynolds' attorney in which the official relayed false information that the jury found caused Simon's termination as Reynolds' business manager. We affirm the district court's grant of a JNOV as to the award of special damages but reverse the district court's JNOV as to general and punitive damages. Although the evidence supports a general and punitive damages award, we find that the amounts awarded by the jury in this case were excessive as a matter of law. We therefore grant Shearson's motion for a new trial on the question of general and punitive damages unless Simon agrees to a remittitur. Finally, we affirm the district court's directed verdict on Shearson's counterclaims.

BACKGROUND

In December 1982, Simon, a resident of Boynton Beach, Florida, met with Reynolds, a part-time resident of Jupiter, Florida. Reynolds was looking for a business manager and Reynolds and Simon eventually agreed that Simon would handle Reynolds' financial affairs and personal investments. (SR. 274-86). ¹ Simon and Reynolds executed a written contract, which set out a percentage basis for Simon's compensation. (SR. 286-87). This percentage was originally set at 5% of Reynolds' annual acting and directing revenues and, although Simon's compensation did not include a percentage of Reynolds' annual investment revenue, Simon's compensation percentage was raised to 7% in 1983. (SR. 1634). The employment contract was to expire on December 1, 1984, with Reynolds and Simon both having the right thereafter to terminate the relationship on not less than thirty days written notice. (J.Ex. 1; J.EX. 3). Simon developed a five-year financial plan for Reynolds which Reynolds endorsed, (SR. 298-302), and sometime in the spring of 1983, Reynolds gave Simon a general power of attorney. (SR. 326).

In May, 1983, Simon opened accounts for both himself and Reynolds with Shearson at its Little Rock office. Simon chose this branch office on the advice of accountant Labe Mell, (Mell), a partner of Simon's personal accountant in Atlanta, Keith Bell, (Bell). The Shearson broker handling the account was Michael Swofford. (SR. 320-25).

Mell began working with Swofford in 1983. Evidence shows that soon after Swofford began to buy and sell bonds for Reynolds in consultation with Mell, Swofford began making payments to Mell and Mell's partner, Bell. These payments were in an amount equal to one half of Swofford's commissions on the Reynolds transactions. (SR. 2769-82; 2360-62; 953-54). Nonetheless, both Mell and Bell denied that they were splitting commissions with Swofford; they testified instead that they believed the payments were made in consideration of tax advice that they provided. (SR. 1933-45; 2319-24; 2341-45). During 1983 and the first half of 1984, Swofford also embezzled money from the Reynolds account. ² (SR. 2827). Both Mell and Bell adamantly deny that they were involved in any way with Swofford's embezzlements, despite the fact that Swofford and other evidence implicated them in the scheme. (SR. 956-68; 989-90; 2153; 2163-73; 2797-822).

In August, 1984, Simon, on Swofford's advice, opened commodities accounts for himself and Reynolds. (SR. 344; 372-76). Although these accounts suffered substantial losses, Swofford reported gains to Simon (SR. 368-72), and Simon eventually directed Swofford to open commodities accounts for various friends and relatives. Swofford never opened these accounts but began reporting fictitious gains in them as well. ³ (SR. 939-40). Although Simon received a statement that his account had lost money, Swofford assured Simon that these reported losses were computer or technical mistakes and that the accounts were actually operating at a profit. (SR. 370; 1861; 461).

On October 4, 1984 Simon and Swofford met concerning these accounts and Simon allegedly instructed Swofford to close all of the commodities accounts, including Reynolds'. (SR. 367-69). According to Simon, a cat and mouse game ensued over the next five weeks with Simon attempting to obtain the "profits" from the closed commodities accounts and with Swofford dodging and explaining the delays and conflicting paperwork at every turn. In addition, discrepancies appeared in the paperwork for Reynolds' other account at the Little Rock office.

Nothing in the record reflects that as of October, 1984, Reynolds had any specific concerns about the handling of the Shearson account or about Simon's handling of Reynolds' investments in general. Nonetheless, at the advice of his publicist, David Gershenson, Reynolds initiated a legal audit of Simon. Evidence also showed that Reynolds and others associated with Reynolds were dissatisfied with Simon's attitude; several people involved in Reynolds' affairs reported personality conflicts. (SR. 646-47; 1597-1619; 2422-33).

On October 9, 1984, Swofford, pressured to send Simon profits that he had orally reported to be in the various commodities accounts, caused Shearson checks to be prepared payable to Reynolds and to those of Simon's friends, relatives, and associates who supposedly had commodities accounts at the Little Rock office. All of the checks were to be paid out of funds in Reynolds' account for which Simon held the power of attorney. Swofford presented the Shearson bank with a letter authorizing this disbursements of funds; this letter of authorization, (forged LOA), was signed "Alexander Simon." (J.Ex. 92). Branch personnel questioned Simon's signature on the letter as it did not appear genuine. Swofford initially claimed that the signature was Simon's; when pressed, however, Swofford admitted that he had forged Simon's name, but claimed that Labe Mell instructed him to do so because the authentic LOA had been delayed. (SR. 1413-14; 1495-96; 2887-88).

The events of the next several days are unclear. Either one or two phone calls were made but the substance of the call or calls is disputed. Shearson claims that its Little Rock branch manager called Simon, that Simon confirmed his knowledge of the forged LOA and that Simon promised to send a new LOA immediately. (SR. 1431-32; 1534-38). According to Shearson, the branch manager later reported Simon's alleged knowledge of the forged LOA and the arrival of the second LOA to Shearson's chief deputy counsel, Kujawski. (SR. 1329; 3192-93).

Simon claims that the branch manager telephoned him twice; in neither conversation did the manager inform Simon of the forged LOA. Rather, the manager merely inquired, in general terms, into how the accounts were doing in order to find out how much Simon knew about the status of Reynolds' account. Simon further testified that he was still attempting to get the "profits" from the commodities accounts and that he informed the manager that he was going to send a letter authorizing named agents, (Keith...