Southern Union Co. v. Southwest Gas Corp.
| Court | United States District Courts. 9th Circuit. United States District Courts. 9th Circuit. District of Arizona |
| Citation | 281 F.Supp.2d 1090 |
| Docket Number | No. CV991294-PHXROS.,CV991294-PHXROS. |
| Parties | SOUTHERN UNION COMPANY, a Delaware corporation, Plaintiff, v. SOUTHWEST GAS CORPORATION, a California corporation, et al., Defendants. |
| Decision Date | 01 August 2003 |
v.
SOUTHWEST GAS CORPORATION, a California corporation, et al., Defendants.
Page 1091
Eric D. Herschmann, Jessica Mann, Michael M. Fay, Kasowitz Benson Torres & Friedman LLP, New York City, Tom Q. Ferguson, Shelly L. Dalrymple, Sam P. Daniel, Jr., Doerner Saunders Daniel & Anderson, Tulsa, OK, Christina Carlson Dodds, Daniel W. Bishop, II, Daniel W. Bishop II PC, Austin, TX, for Plaintiffs.
Michael J. O'Connor, Esq., Douglas F. Behm, Michael ScottMcCoy, Michael J. Farrell, Jennings Strouss & Salmon, PLC, Phoenix, AZ, Seth Aronson, Esq., Marc F. Feinstein, Patrick Lynch, Floy E. Andrews, O'Melveny & Myers LLP, Los Angeles, CA, Michael R. Klein, Steven F. Cherry, Howard M. Shapiro, David P. Donovan, Wilmer Cutler & Pickering, Washington, DC, Michael J. Bowe, Kasowitz Benson Torres & Friedman LLP, New York City, Thomas R. Sheets, Southwest Gas Corporation, Steve Morris, Kristina Pickering, Morris Pickering & Sanner, Las Vegas, NV, Paul J. Cleary, Scott R. Rowland, Boone Smith David Hurst & Dickman, Tulsa, OK, for Defendants.
SILVER, District Judge.
On December 18, 2002, after a jury trial of nearly two months, the jury returned a verdict for Plaintiff Southern Union Company against Arizona Corporation Commissioner James Irvin, the only remaining Defendant at the conclusion of trial, and
Page 1092
assessed a punitive damages award of $60,000,000. Southern Union prevailed on two causes of action, intentional interference with business expectancy and intentional interference with contractual relations, both arising from Irvin's activities generally in 1999 which caused the failure of an attempted merger between Southern Union and Southwest Gas Corporation. At the time of both the attempted merger and the jury verdict, Irvin held elective office as a Commissioner on the Arizona Corporation Commission. He has filed an Amended Motion for JNOV or in the Alternative for New Trial or Remittitur [Doc. # 2238], seeking a new trial or remittitur on the punitive damage award of $60,000,000.
Following the Supreme Court's decision in State Farm Mutual Auto. Ins. Co. v. Campbell, ___ U.S. ___, 123 S.Ct. 1513, 155 L.Ed.2d 585 (2003) (Campbell), the parties submitted supplemental briefing on the issue of punitive damages: Commissioner Irvin's Supplemental Memorandum of Law [Doc. #2244], Southern Union Company's Response [Doc. #2245], and Commissioner Irvin's Reply [Doc. # 2246]. Following a hearing on June 2, 2003, the Court ordered further supplemental briefing, and both Southern Union [Doc. # 2253] and Commissioner Irvin [Doc. # 2254] submitted additional memoranda. Having considered the briefing of the parties, Commissioner Irvin's motion will be denied, and the punitive damages award of $60,000,000 assessed by the jury will be upheld.
A. Punitive Damages under Arizona Law
Commissioner Irvin's initial argument is that there is insufficient evidence to sustain an award of punitive damages under Arizona law. "To recover punitive damages, the plaintiff must ... introduce sufficient evidence to allow the trier-of-fact to calculate a punitive damage award that is reasonable under the circumstances." Hawkins v. Allstate Ins. Co., 152 Ariz. 490, 497, 733 P.2d 1073, 1080 (Ariz.1987). Hawkins specifies three nonexclusive factors that the Court should consider in evaluating an award of punitive damages: the financial position of the defendant, the nature of the defendant's conduct, and the profitability of the defendant's conduct. Id. at 501-2, 733 P.2d 1073. See also Hyatt Regency Phoenix Hotel Co. v. Winston & Strawn, 184 Ariz. 120, 134, 907 P.2d 506, 520 (Ariz.App.1995) (outlining and applying three Hawkins factors). "A plaintiff is not required to put on proof of every factor, nor is any single factor a prerequisite to recovery of punitive damages. Rather, the plaintiff must produce evidence so that the amount awarded may not be said to be so unreasonable in regard to the circumstances as to show the influence of passion or prejudice." Hawkins, 152 Ariz. at 501, 733 P.2d 1073 (quotations and citations omitted). The Court must show considerable deference to the judgment of the jury:
We vest the trier-of-fact with discretion to award an amount of punitive damages that, in its judgment, will punish the defendant and serve as an example to deter similar future misconduct. Once exercised, this discretion should not be disturbed unless the award is the result of passion or prejudice. The appropriate test of passion or prejudice is whether the verdict is so manifestly unfair, unreasonable, and outrageous as to shock the conscience of the court. The amount of the award alone is not sufficient evidence to prove the jury acted with passion or prejudice.
Hawkins, 152 Ariz. at 501, 733 P.2d 1073 (quotations and citations omitted) (emphasis added).
Page 1093
The first consideration is the financial position of the defendant. Hawkins, 152 Ariz. at 497, 733 P.2d 1073. "It is axiomatic that the wealthier the wrongdoing defendant, the greater the award of punitive damages necessary to punish him. We recognize, however, that the award must not financially kill the defendant." Id. at 501, 733 P.2d 1073.
Irvin argues that the punitive damages award in this case must be overturned because it would "financially kill" him based on the evidence that Southern Union introduced at trial. At trial, Southern Union produced evidence of one financial statement of Irvin's and his wife's assets (Exhibit 435) which reflected that on an undisclosed date they had $859,000 in assets, excluding Irvin's interests in his family's business. Tr. at 4770-71. On cross-examination, Irvin conceded that he had stock in the family business but claimed to have no knowledge of how much the stock or the company was worth. Tr. at 4762. Later, Irvin claimed, without any offer of proof or substantiation, that his individual net worth was "considerably less" than that reflected on the joint financial statement. Tr. at 4821.
Southern Union, however, presents case law establishing that the burden is on Irvin to show that the verdict would actually financially destroy him. In Arizona, "there is no requirement that specific financial circumstances be presented. A defendant who has not introduced evidence of his financial circumstances many not complain of its absence." Asphalt Engineers, Inc. v. Galusha, 160 Ariz. 134, 138, 770 P.2d 1180, 1184 (Ariz.App.1989). See also Nienstedt v. Wetzel, 133 Ariz. 348, 357, 651 P.2d 876, 885 (1982) (holding that "a defendant may not complain of the absence of evidence of his wealth when he has made no effort to introduce such evidence"); Hawkins, 152 Ariz. at 501, 733 P.2d 1073 ("A plaintiff is not required to put on proof of every factor, nor is any single factor a prerequisite to recovery of punitive damages. See Nienstedt v. Wetzel, 133 Ariz. at 357, 651 P.2d at 885 (evidence of defendant's wealth not required to recover punitive damages).") (citation in original). Further, Arizona courts have held that "the sole fact that an award exceeds a defendant's present assets" is not sufficient grounds for setting it aside. Puz v. McDonald, 140 Ariz. 77, 79, 680 P.2d 213, 215 (Ariz.App.1984).
Irvin presented no evidence that the award would actually financially destroy him. The only evidence of his net worth in the record was offered by Southern Union. Irvin disputed the amount by merely testifying that the evidence was not accurate. Without corroboration of this statement and other evidence, Irvin has waived his right to complain of his absence of wealth.
The second consideration in assessing the award of punitive damages is "the nature of the defendant's conduct, including the reprehensibility of the conduct and the severity of the harm likely to result, as well as the harm that has occurred, from the defendant's conduct." Hawkins, 152 Ariz. at 497, 733 P.2d 1073. More particularly, "[t]he more reprehensible the act and the more severe the resulting harm, the greater the award of punitive damages that is reasonable under the circumstances. The duration of the misconduct, the degree of defendant's awareness of the harm or risk of harm, and any concealment of it are elements to consider in judging the reprehensibility of the defendant's conduct." Id. at 497, 733 P.2d 1073.
Irvin argues that his conduct was not reprehensible, because it took place over a short period of time (two months) and resulted in only economic injuries. Further, Irvin argues that any concealment of his activities should not be considered because the concealment itself was not the
Page 1094
proximate cause of the injury. Irvin's first objection is meritless, because Southern Union presented evidence at trial of a determined effort, over a number of months, to disrupt the Southern Union-Southwest Gas merger. The evidence also showed that during this time, Irvin abused his privileges as a Corporation Commissioner to attempt to disrupt the deal, while purposely concealing his activities from the Commission. Additionally, Irvin was acutely aware of the risk of harm to Southern Union, a fact which the jury clearly found in order to find him liable of an intentional tort and award an impressive amount of punitive damages. Southern Union accurately argues that this type of conduct should be severely deterred, which is a key purpose of an award of punitive damages. Finally, the concealment is also an "element[ ] to consider in judging the reprehensibility of [Irvin's] conduct." Hawkins, 152 Ariz. at 497, 733 P.2d 1073.
Irvin's concealment is relevant to determining the degree of reprehensibility. Irvin relies on Saucedo v. Salvation Army, 200 Ariz. 179, 24 P.3d 1274 (Ariz.App. 2001), in which the Court of Appeals overturned an award of punitive damages where the requisite evil mind was inferred...
To continue reading
Request your trial
-
Simon v. San Paolo US Holding Co., Inc., S121933.
...have spilled, causing "immense and incalculable" additional harms); Southern Union Company v. Southwest Gas Corporation (D.Ariz.2003) 281 F.Supp.2d 1090, 1099-1105 (unquantifiable harm from breach of public trust and potential harm from intentional interference with corporate merger may be ......
-
Southern Union Co. v. Irvin, 06-17347.
...district court found as a fact that one motive consisted in Irvin's "personal interests." Southern Union Co. v. Southwest Gas Corp., 281 F.Supp.2d 1090, 1096 Because Southern Union challenged its rival in court before the Irvin-backed transaction went through, no bribe was paid. But conside......
-
Southern Union Co. v. Irvin, 06-17347.
...district court found as a fact that one motive consisted in Irvin's "personal interests." Southern Union Co. v. Southwest Gas Corp., 281 F.Supp.2d 1090, 1096 Because Southern Union challenged its rival in court before the Irvin-backed transaction went through, no bribe was paid. But conside......