Filed: Mar. 27, 2009
Latest Update: Mar. 02, 2020
Summary: FOR PUBLICATION UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT SOUTHERN UNION COMPANY, No. 06-17347 Plaintiff-Appellee, D.C. No. v. CV-99-01294-ROS JAMES M. IRVIN, ORDER Defendant-Appellant. AMENDING ORDER OF NOVEMBER 7, 2008, AND DENYING PETITION FOR REHEARING EN BANC AND AMENDED ORDER Appeal from the United States District Court for the District of Arizona Roslyn O. Silver, District Judge, Presiding Submitted November 26, 2007* Filed November 7, 2008 Amended March 27, 2009 Before:
Summary: FOR PUBLICATION UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT SOUTHERN UNION COMPANY, No. 06-17347 Plaintiff-Appellee, D.C. No. v. CV-99-01294-ROS JAMES M. IRVIN, ORDER Defendant-Appellant. AMENDING ORDER OF NOVEMBER 7, 2008, AND DENYING PETITION FOR REHEARING EN BANC AND AMENDED ORDER Appeal from the United States District Court for the District of Arizona Roslyn O. Silver, District Judge, Presiding Submitted November 26, 2007* Filed November 7, 2008 Amended March 27, 2009 Before: S..
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FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
SOUTHERN UNION COMPANY, No. 06-17347
Plaintiff-Appellee, D.C. No.
v. CV-99-01294-ROS
JAMES M. IRVIN, ORDER
Defendant-Appellant. AMENDING
ORDER OF
NOVEMBER 7,
2008, AND
DENYING
PETITION FOR
REHEARING EN
BANC AND
AMENDED
ORDER
Appeal from the United States District Court
for the District of Arizona
Roslyn O. Silver, District Judge, Presiding
Submitted November 26, 2007*
Filed November 7, 2008
Amended March 27, 2009
Before: Stephen Reinhardt, John T. Noonan, and
Ferdinand F. Fernandez, Circuit Judges.
Order;
Concurrence by Judge Reinhardt;
Dissent by Judge Noonan
*The panel unanimously finds this case suitable for decision without
oral argument. Fed. R. App. P. 34(a)(2).
3763
3764 SOUTHERN UNION CO. v. IRVIN
COUNSEL
Robert A. Mandel, Greenberg Traurig, LLP, Phoenix, Ari-
zona, for the defendant-appellant.
Tom Q. Ferguson, Doerner, Saunders, Daniel & Anderson,
L.L.P., Tulsa, Oklahoma, for the plaintiff-appellee.
ORDER
Upon further consideration,1 we amend our order filed
November 7, 2008, and commencing at slip op. 152812 as fol-
lows:
(1) We add the footnote reference “4” following the word
“remittitur” at slip op. 15285, seventh line (1233).
(2) The footnote shall read as follows:
4
When a punitive damage award exceeds the consti-
tutional maximum, we decide on a case-by-case
basis whether to remand for a new trial or simply to
order a remittitur. Leatherman Tool Group v. Cooper
Indus., 285 F.3d 1146, 1151 (9th Cir. 2002). Taking
this case-specific approach, we have found different
solutions to be appropriate in different circum-
stances. Compare Planned Parenthood of Columbia/
Willamette Inc. v. American Coalition of Life Activ-
ists, 422 F.3d 949, 965 (9th Cir. 2005)(“remand[ing]
for the district court to order a new trial unless physi-
1
Judges Reinhardt and Fernandez concur in this amendment. Judge
Noonan dissented from the order of November 7, 2008, and does not join
in this amendment.
2
The order is published as Southern Union Company v. Irvin, 548 F.3d
1230 (9th Cir. 2008), and we will hereafter put page references to the pub-
lished order in parentheses.
SOUTHERN UNION CO. v. IRVIN 3765
cians accept a remittitur”), with In re Exxon Valdez,
472 F.3d 600, 625 (9th Cir. 2006) (remitting the
punitive damage award with no option for a new
trial, so as to bring “protracted litigation to [an]
end”), reversed on other grounds by Exxon Shipping
Co. v. Baker, 128 S. Ct. 2606 (2008). Here, we con-
clude that it is appropriate to afford Southern Union
the option of accepting the remittitur or re-litigating
the case. We do so in light of the possibility that
additional evidence might be submitted at a new trial
that could affect the calculation of a proper punitive
damage ratio, and moreover, in recognition that,
while we are not required to do so in every case,
“[t]o avoid any conflict with the Seventh Amend-
ment, the preferable course is to afford the party
awarded the grossly excessive punitive damages . . .
the option of either accepting the remittitur of the
punitive damage award or a new trial on that issue.”
Morgan v. Woessner, 997 F.2d 1244, 1258-59 (9th
Cir. 1993).
The petition of Southern Union Co. for rehearing en banc
was circulated to the judges of the court, and no judge
requested a vote for en banc consideration. The petition for
rehearing en banc is DENIED.
No subsequent petition for rehearing or for rehearing en
banc may be filed in this matter.
ORDER
The jury in this case awarded $975,181 in compensatory
damages to Southern Union Company, of which it assessed
forty percent or $395,072.38 against James M. Irvin, and went
on to assess an additional $60,000,000 of punitive damages
against him. On appeal, we vacated the punitive damage
3766 SOUTHERN UNION CO. v. IRVIN
award, which amounted to punitive damages of over 153
times the compensatory damage award. See S. Union Co. v.
Sw. Gas Corp., 415 F.3d 1001, 1009 (9th Cir. 2005) (S. Union
I). We then remanded for a remittitur or a new trial on dam-
ages.
Id. at 1011. The district court offered Southern Union
the opportunity to accept a remittitur of punitive damages to
$4 million, that is a punitive damage award at slightly over
ten times the compensatory damage award. Southern Union
accepted. Irvin again appeals.
Due Process “prohibits the imposition of grossly excessive
or arbitrary punishments on a tortfeasor.” State Farm Mut.
Auto. Ins. Co. v. Campbell,
538 U.S. 408, 416,
123 S. Ct.
1513, 1519-20,
155 L. Ed. 2d 585 (2003). No “simple mathe-
matical formula” exists in this area. BMW of N. Am., Inc. v.
Gore,
517 U.S. 559, 582,
116 S. Ct. 1589, 1602,
134 L. Ed.
2d 809 (1996).
Nevertheless, the Court has pointed to three guideposts:
“(1) the degree of reprehensibility of the defendant’s miscon-
duct; (2) the disparity between the actual or potential harm
suffered by the plaintiff and the punitive damages award; and
(3) the difference between the punitive damages awarded by
the jury and the civil penalties authorized or imposed in com-
parable cases.” State
Farm, 538 U.S. at 418, 123 S. Ct. at
1520. In considering them, our goal is to determine whether
the punitive damages achieved their ultimate objectives of
deterrence and punishment, without being unreasonable or
disproportionate. See Exxon Shipping Co. v. Baker, ___ U.S.
___, ___,
128 S. Ct. 2605, 2621,
171 L. Ed. 2d 570 (2008);
State
Farm, 538 U.S. at 419,
426, 123 S. Ct. at 1521, 1524.
Here, the parties have not pointed to other similar cases, if,
indeed, there are any, or to comparable penalties authorized
for similar conduct. We therefore begin by looking to the
other two guideposts.
SOUTHERN UNION CO. v. IRVIN 3767
We have already touched upon the second of them, and we
do find the over ten to one ratio disquieting in this case,
although choosing a correct ratio among the infinite number
of ratios theoretically available is no easy task.1 It is a guide-
post we will return to after first considering the reprehensibil-
ity issue; that is the issue that the Court itself has referred to
as the most important of the guideposts. See BMW, 517 U.S.
at 575, 116 S. Ct. at 1599; see also State
Farm, 538 U.S. at
419, 123 S. Ct. at 1521.
As we see it, most of the indicia of reprehensibility do not
appear here. See State
Farm, 538 U.S. at 419, 123 S. Ct. at
1521; Planned Parenthood of Columbia/Willamette Inc. v.
Am. Coal. of Life Activists,
422 F.3d 949, 957-60 (9th Cir.
2005). Any harm caused was not to some poor struggling per-
son; it was inflicted upon a very large company — one that
Irvin claims to have thought was unsavory, by the way. More-
over, the harm was not physical; reckless disregard of the
safety of others was not involved; Southern Union was not
financially vulnerable; and the incident was isolated, although
it was not a mere accident. When we say that the incident was
isolated, we do not intend to condone Irvin’s actions either at
the time of the wrongdoing or at trial.2 That is, we do not
overlook the fact that Irvin held an important public position,
which gave him great power to aid or wrong others.3 Irvin, as
the evidence showed, abused and misused his power and
caused significant damage to Southern Union — he has been
ordered to pay close to $400,000 of compensatory damages
1
It is worth noting, however, that when the Supreme Court selected a
ratio for federal maritime law purposes, rather than constitutional pur-
poses, it saw a ratio of one to one as the “fair upper limit.” Exxon Ship-
ping, __ U.S. at __, 128 S. Ct. at 2633.
2
At trial, Irvin actually sought to impede the jury’s search for truth. S.
Union I, 415 F.3d at 1008.
3
The Commission of which he was a member “has sometimes been
dubbed the fourth branch of the government of Arizona.” S. Union I, 415
F.3d at 1014 (Fernandez, J., concurring and dissenting).
3768 SOUTHERN UNION CO. v. IRVIN
for that. But, the evidence does not prove that Irvin obtained
(or sought) any personal gain from his actions, certainly no
gain of a financial nature, whether or not that was the case.
So, as is always true, we return to the question of how
much is enough, and of when the constitutional limit is
reached. Irvin is far from commendable, but he has not
inflicted egregious physical or economic harm upon the weak,
and we cannot even say on the basis of the evidence that he
sold his office for financial gain. He will also have to pay
compensatory damages. That award of damages was not pal-
try or minimal by any means. It was substantial. Undoubtedly
Irvin’s behavior outraged the jurors and the district judge, all
of whom listened to and saw him in the close quarters of a
courtroom setting. Still, wrong and wrong-headed though he
is, we do not see constitutional justification for calling down
the wrath of Apollyon upon him and his finances.
In fine, as we see it, the Constitution permits a three to one
ratio of punitive to compensatory damages in this case, but
not more. That is the sum of $1,185,217.14 in addition to the
compensatory damages of $395,072.38. In selecting this ratio,
we have considered whether the amount of punitive damages
it results in is commensurate with achieving the two purposes
we have mentioned without exceeding the constitutional limit.
We have determined that it is in this case. In so stating, we
emphasize that where the constitutional limit lies with respect
to punitive damages will vary from case to case. Determining
that limit is an art, not a science; no mathematical formula
controls; no single asymptote defines the limit for all cases.
We see no proper reason to remand this case to the district
court for further proceedings regarding punitive damages.
“Having already afforded the district court an opportunity to
review the award[ ] in the first instance, we believe it is
appropriate to remit rather than again to remand.” Planned
Parenthood, 422 F.3d at 963.
SOUTHERN UNION CO. v. IRVIN 3769
Therefore, we reverse the district court’s judgment regard-
ing the punitive damage award, and vacate it. We reduce the
award to the amount of $1,185,217.14. We also remand so
that the district court may order a new trial unless Southern
Union accepts the remittitur.4 If accepted, post judgment inter-
est shall run on the reduced award from the date of entry of
the original judgment, August 14, 2003. See Planned Parent-
hood of Columbia/Willamette Inc. v. Am. Coal. of Life Activ-
ists, 518 F.3d 1013, 1022 (9th Cir. 2008).
REVERSED and VACATED as to the amount of the puni-
tive damage award and REMANDED. The parties shall bear
their own costs on appeal.
4
When a punitive damage award exceeds the constitutional maximum,
we decide on a case-by-case basis whether to remand for a new trial or
simply to order a remittitur. Leatherman Tool Group v. Cooper Indus.,
285 F.3d 1146, 1151 (9th Cir. 2002). Taking this case-specific approach,
we have found different solutions to be appropriate in different circum-
stances. Compare Planned Parenthood of Columbia/Willamette Inc. v.
American Coalition of Life Activists,
422 F.3d 949, 965 (9th Cir.
2005)(“remand[ing] for the district court to order a new trial unless physi-
cians accept a remittitur”), with In re Exxon Valdez,
472 F.3d 600, 625
(9th Cir. 2006) (remitting the punitive damage award with no option for
a new trial, so as to bring “protracted litigation to [an] end”), reversed on
other grounds by Exxon Shipping Co. v. Baker,
128 S. Ct. 2606 (2008).
Here, we conclude that it is appropriate to afford Southern Union the
option of accepting the remittitur or re-litigating the case. We do so in
light of the possibility that additional evidence might be submitted at a
new trial that could affect the calculation of a proper punitive damage
ratio, and moreover, in recognition that, while we are not required to do
so in every case, “[t]o avoid any conflict with the Seventh Amendment,
the preferable course is to afford the party awarded the grossly excessive
punitive damages . . . the option of either accepting the remittitur of the
punitive damage award or a new trial on that issue.” Morgan v. Woessner,
997 F.2d 1244, 1258-59 (9th Cir. 1993).
3770 SOUTHERN UNION CO. v. IRVIN
REINHARDT, Circuit Judge, concurring:
Although I concur in the order, I would add another consid-
eration to our discussion of the relevant factors in assessing
punitive damages.
If punitive damages are to achieve the twin purposes of
deterrence and punishment, see Order at 15282-83, we must
consider the impact of a damage award upon the particular
defendant in determining the constitutional limit. The appro-
priate ratio of punitive to compensatory damages may vary
with the amount of the compensatory damages and the net
worth of the defendant. In some cases, although the conduct
may be similar, because of lower compensatory damages or
the defendant’s higher net worth, a higher ratio may be neces-
sary to achieve a deterrent or punitive effect. In other cases,
where the variables are the opposite, a lower ratio may be
appropriate.
For example, if $10,000 in compensatory damages is
awarded against a defendant with a net worth of $50,000, then
$10,000 in punitive damages may be an appropriate amount
to achieve both the punitive and deterrent purposes. The same
amount of punitives awarded against a company earning $1
billion a year, with a net worth of $50 billion, would hardly
serve either of these objectives.
The precept that the defendant’s wealth should be consid-
ered if we are to achieve the intended effects of deterrence
and punishment is hardly novel. See, e.g., Browning-Ferris
Indus. v. Kelco Disposal,
492 U.S. 257, 300 (U.S. 1989)
(O’Connor, J., concurring in part and dissenting in part)
(“Blackstone remarked that the ‘quantum, in particular, of
pecuniary fines neither can, nor ought to be, ascertained by
any invariable law. The value of money itself changes from
a thousand causes; and at all events, what is ruin to one man’s
fortune, may be a matter of indifference to another’s.’ ”)
(quoting William Blackstone, 4 Commentaries *371); H.R.
SOUTHERN UNION CO. v. IRVIN 3771
Rep. No. 102-40, at 73 (1991) (“[J]uries normally take the
defendant’s financial standing into account in awarding puni-
tive damages; courts have recognized that a higher amount
may be appropriate against a particularly large or wealthy
employer, to ensure effective deterrence.”); Restatement (Sec-
ond) of Torts § 908 (1979) (“In assessing punitive damages,
the trier of fact can properly consider the character of the
defendant’s act, the nature and extent of the harm to the plain-
tiff that the defendant caused or intended to cause and the
wealth of the defendant.”).
In the case before us, an award of over ten times the
amount of the compensatory damages is far in excess of one
that would reasonably accomplish the twin objectives. The
proposed punitive damages are hardly commensurate with the
need to deter the wrong-doer or others like him from commit-
ting similar offenses. Nor are they commensurate with the
need to impose sufficient punishment on this defendant.
In sum, I write separately to express my agreement that the
ratio arrived at today is not a magic figure, although it is the
proper ratio here, but, more important, to make the point
sometimes overlooked, that there should be no fixed ratio;
rather, in a number of cases the ratio must be determined in
light of the two purposes discussed above.
NOONAN, Circuit Judge, dissenting:
What’s a court of appeals up to when it decides that it is
better equipped to determine a defendant’s delinquency and to
assess the appropriate penalty than the judge who heard the
testimony and who has even experienced the defendant’s mis-
conduct in her court? A federal court of appeals has a definite
duty when it reviews an award of punitives. In a federal case,
it must decide whether the damages are so excessive and so
unexpected that they offend the principle of fairness enshrined
3772 SOUTHERN UNION CO. v. IRVIN
in the Due Process Clause of the Fifth Amendment. See BMW
of North America v. Gore, 517 U.S. 559, 574 (1996). The
legal question is to be decided de novo. Cooper Industries,
Inc. v. Leatherman Tool Group, Inc.,
532 U.S. 424, 435-436
(2001).
In reaching this determination of constitutional law the
court is to be guided by the degree of reprehensibility of the
offense; the ratio of the punitives to the compensatory dam-
ages awarded; and the civil or criminal penalties that could be
awarded for comparable misconduct.
Gore, 512 U.S. at 574-
585. Unavoidably a reviewing court must exercise its own
judgment in applying these guideposts to the facts established
in the case. The court must exercise further judgment in deter-
mining whether its legal conclusion, after applying these legal
guides, is that the constitution has been violated by the award.
Undeniably, in the absence of a mechanical rule, the subjec-
tive views of the judges affect the decision. See Karlan,
“ ‘Pricking the Lines’: The Due Process Clause, Punitive
Damages and Criminal Punishment.”
88 Minn. L. Rev. 880,
883 (2004). But this judgment must be based on facts.
She who heard the case is in the best position to determine
the facts. In the exercise of this function, she is analogous to
a sentencing judge in a criminal case: she has heard all the
witnesses and formed a judgment of the defendant’s demea-
nor and credibility. Cooper
Industries, 532 U.S. at 440. What
the reviewing court is not free to do is to make up facts or
suppress facts established at trial. The legal question before
the court, do the damages awarded offend due process of law,
is not to be confused with the question: would I have awarded
these damages if I were the district judge. Our court, I sug-
gest, has answered the latter, irrelevant query.
No need here to set out at length the facts established at
trial and stated in our opinion upholding Irvin’s liability.
Southern Union v. Irvin,
415 F.3d 1001 (9th Cir. 2005). I
summarize those facts and what could rationally be inferred
SOUTHERN UNION CO. v. IRVIN 3773
from them: Irvin, the chairman of the Arizona Corporation
Commission, worked determinedly for a period of four
months to promote the merger of an Arizona utility company
with another utility and to defeat a merger proposed by South-
ern Union over $100 million more beneficial to the Arizona
company. In court, Irvin testified that the motive of his machi-
nations was the public good and that his calculated course to
achieve his end was within the scope of his official duties.
The jury did not believe his tale. To the contrary, the jury
awarded punitives that reflected outrage at Irvin’s outrageous
conduct. As his motive was not the public welfare, what
prompted his outrageous behavior? Ruling on the award of
punitives, the 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 (2003).
Because Southern Union challenged its rival in court before
the Irvin-backed transaction went through, no bribe was paid.
But consider what a rational jury could have inferred from the
fact that a young protégé of Irvin with little else to recom-
mend him except this connection was to be paid a super-large
fee for his help in arranging the deal. One does not need to
look further to identify Irvin’s “personal interests.”
The district court also found:
Irvin’s purposeful persistence in this effort was matched by
his efforts at concealment. As far as possible, his activities to
block the merger were kept from his fellow commissioners.
Southern Union Co., 281 F. Supp.3d at 1094. Afterwards he
covered up his wrongdoing to ensure the outcome of the
scheme. Id. When Southern Union challenged him and began
litigation, his effort at concealment continued. He persevered
in hiding his wrongful acts throughout the trial and in particu-
lar while testifying before the jury. Egregiously, he arranged
the manufacture of evidence, purported notes of his wife’s
telephone conversation, which he persuaded his counsel to
present as genuine to the court.
Id. at 1096. Such intentional
3774 SOUTHERN UNION CO. v. IRVIN
fabrication of evidence confirmed his consciousness of guilt
and added to the reprehensibility of his conduct.
It is not apparent to me how this court can overlook,
neglect, or minimize these findings of the trial judge. It is
equally not apparent to me how this court can treat the dere-
liction of duty by a high public official as though it were a
run-of-the-mill tort. I take judicial notice of the existence and
conclusion of a report to the Arizona legislature. Fed. R. Evid.
201(b); Transmission Agency of Northern California v. Sierra
Pacific Power Co.,
295 F.3d 918, 924 (9th Cir. 2002). Irvin
was a prominent Republican, holding high elective office in
Arizona. The Republican-controlled Arizona House of Repre-
sentatives conducted an investigation of his conduct as com-
missioner of corporations and recommended his impeachment
for “high crimes and misdemeanor under the Arizona consti-
tution.” In the Matter of the Arizona House of Representatives
Investigation of Certain Allegations Against State Corpora-
tion Commissioner James M. Irvin, Vol. I: Southern Union v.
Irvin, AZ H.R. Rep., 46th Leg., 191 (2003). Irvin resigned a
week after the report became known. Central to the report was
Irvin’s conduct affecting the Southern Union merger.
I do not cite the report as further evidence of the conduct
already established in court, but as a measure of the reprehen-
sibility of Irvin’s conduct. Punitives cannot be used to punish
a defendant for harming persons not before the court. Philip
Morris, USA v. Williams,
127 S. Ct. 1057, 1063 (2007). At the
same time, “Evidence of actual harm to nonparties can help
show that the conduct that harmed the plaintiff also posed a
substantial risk of harm to the general public, and so was par-
ticularly reprehensible.”
Id. As we have already determined,
Irvin’s “exploitation of high public office” and the noneco-
nomic damage done by him in fabricating evidence in his
defense in court were proper factors to be considered in the
punitives award. Southern Union v. Irvin,
415 F.3d 1001,
1011 (2005). Due process has not been denied this man faith-
less in public office and unscrupulous in his own defense.
I dissent.
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