Lead Opinion
OPINION
This appeal and cross-appeal arise from plaintiffs’ (collectively “HRP”) suit against defendant Winston & Strawn for the legal malpractice of its former partner, Arthur Greenfield. We affirm the judgment for compensatory and punitive damages against Winston & Strawn but reverse part of the trial court’s award of credit for partial satisfaction against the judgment.
I. FACTUAL AND PROCEDURAL HISTORY
We view the facts and all inferences in the light most favorable to sustaining the jury verdict and resulting judgment. Bradshaw v. State Farm Mut. Auto. Ins. Co.,
A. Construction of the Phoenix Hyatt Regency Hotel
HRP was a limited partnership formed to develop the Hyatt Regency Hotel in Phoenix. Its general partners were Samuel Shapiro; his son, Barry Shapiro; two other members of the Shapiro family; two other individuals; and Nametco Corporation, a Shapiro family business.
The AIA contract protected HRP in several ways. For instance, the agreement did not create any contractual relations between HRP and any subcontractor. Chanen had to indemnify HRP for certain claims arising out of an act or omission of Chanen. Chanen assumed responsibility for the acts of its employees. HRP was not required to pay any money, except as required by law to a subcontractor. Even though the contract was a cost-plus contract, HRP was not required to pay for costs incurred due to Chan-en’s negligence.
In July 1974, Chanen entered into an Equipment Lease with Form-Eze Systems, Inc. (“Form-Eze”), pursuant to which FormEze furnished metal forms and other materials used to build concrete floors in the hotel. Chanen and Form-Eze also entered into a Labor Guarantee Agreement, under which Form-Eze guaranteed that labor costs for the forming operations would not exceed sixty-five cents per square foot. Form-Eze provided a supervisor with expertise in forming operations, and Chanen supplied the laborers. Form-Eze’s equipment on the job-site secured the Labor Guarantee Agreement. Chanen did not enter into these agreements as an agent for HRP.
By November 1974, the forming operations fell significantly behind schedule and a dispute arose between Chanen and Form-Eze. Form-Eze claimed that Chanen had breached the Labor Guarantee Agreement by throwing the Form-Eze supervisor off the job. Chanen countered that Form-Eze had breached the Labor Guarantee Agreement and told Form-Eze that Chanen would retain possession of the leased equipment because the labor costs exceeded the guaranteed maximum by more than $200,000. Chanen continued to use Form-Eze’s equipment until the hotel’s frame and flooring were completed in July 1975. Chanen then delivered the equipment to a storage yard.
B. The Form-Eze Litigation
In July 1975, Form-Eze sued Chanen, HRP and its general partners in Federal District Court for breach of the Equipment Lease and the Labor Guarantee Agreement, and for wrongful retention of Form-Eze’s equipment. Inryco, Inc. later intervened, claiming rights to the equipment by virtue of a sale and lease-back agreement it had enterеd with Form-Eze. Form-Eze and Inryco alleged that Chanen was acting as HRP’s appointed agent.
Form-Eze asked Chanen’s attorney, Arthur Greenfield, who was then a partner at Snell & Wilmer, to accept service on HRP’s behalf. Greenfield asked HRP’s Barry Shapiro if HRP would like Greenfield to represent HRP in the matter and accept service on HRP’s behalf; Shapiro said yes. Although Greenfield immediately recognized a potential conflict of interest, he never met jointly with Chanen and HRP to discuss the conflict, and he never obtained a waiver of the conflict from Chanen and HRP. Greenfield also never informed HRP that he served on Chanen’s board of directors.
Greenfield answered the Form-Eze and Inryco complaints on behalf of Chanen and HRP, erroneously admitting that Chan-en was acting as an agent for its disclosed principal, HRP.
Early in the case, Form-Eze’s counsel, Eric Bistrow, discussed with Greenfield how Chanen was Form-Eze’s “principal target.” Bistrow suggested that because Greenfield’s defense theory shifted any potential liability from Chanen to HRP, Greenfield might have a conflict in representing both defendants. Greenfield acknowledged the possibility of a conflict, but later told Bistrow that he had resolved it.
In April 1977, HRP filed for bankruptcy. Greenfield twice wrote to Barry Shapiro and suggested that in light of the pending bankruptcy, HRP should consider retaining separate counsel in the Form-Eze litigation. Greenfield advised Shapiro, however, that he did “not believe there is any conflict in our representation of Chanen along with [HRP] as we have been doing.” HRP did not retain separate counsel.
In the Spring of 1978, HRP assigned its expected recovery on the counterclaim to Arizona Title Insurance & Trust Company, the insurer of HRP’s defaulted construction loans on the hotel. Arizona Title agreed to advance HRP’s attorneys’ fees
On September 6, 1979, Greenfield sent HRP notice that a trial before a Special Master appointed by the District Court was scheduled for later that year.
Greenfield tried the Form-Eze case to the Spеcial Master on March 19-27, 1980. He did not inform HRP that its case was being tried. No HRP witnesses were called, and the ALA contract between Chanen and HRP was not offered as an exhibit. Greenfield offered no evidence on behalf of HRP showing that the retention of the forms was the conduct of Chanen, not HRP. When that issue came up at trial, HRP had no witness to refute the testimony of Chanen’s witness that HRP made the decision to retain the forms.
In a post-trial brief, Greenfield argued that Form-Eze could not “hold Chanen liable since it was acting in an agency capacity for a disclosed principal [HRP].”
On December 8, 1980, the Special Master stated his preliminary conclusion that Chan-en and HRP were liable because they had breached the Labor Guarantee Agreement. He directed the parties to supply additional briefing. On February 23, 1981, Form-Eze
C. Greenfield’s Actions After Joining Winston & Strawn
Greenfield became a partner at Winston & Strawn on March 1, 1981, when CG & I merged with the Chicago firm. Greenfield and his Phoenix partners brought their clients and legal business to Winston & Strawn without liquidating CG & I’s affairs.
On March 2, 1981, the day after he joined Winston & Strawn, Greenfield filed a brief arguing, inter alia, that Chanen should not be held liable because it was HRP’s agent. Greenfield still had not informed HRP that its case had been tried almost a year earlier or of HRP’s potential liability.
Greenfield did, however, inform Chanen of these matters. In a letter from Greenfield to Chanen’s accountants, he advised that the Special Master’s tentative findings “appear to be adverse to defendants [Chanen and HRP],” but that “the issues of agency” would have to be resolved before Chanen’s liability “[could] be finally computed.” In a letter from Chanen to its accountants, Greenfield opined that Chanen had “a significant chance of using the agency relationship to ultimately protect Chanen.”
On June 25,1981, the Special Master held a hearing addressing the amount of damages to be awarded to Form-Eze and Inryco. Although Greenfield knew that HRP and Chanen faced potential liability of over $3 million, he sent an associate, Michael Rollins, to attend the hearing. The hearing transcript reflects that Rollins appeared on behalf of only Chanen. One of Form-Eze’s attorneys later testified that Rollins “did nothing at all” at the hearing. At one point, the Special Master offered Rollins an additional five days to address a legal point. Rollins responded, “Fine, because I haven’t gone through the briefs.” Rollins later testified that he was referring to briefs handed out at the hearing.
On August 28, 1981, Greenfield argued to the Special Master against finding that Chanen was acting as an agent for an undisclosed principal. Greenfield knew that his argument, if successful, would have completely protected Chanen and left HRP liable for the whole judgment.
On September 22,1981, the Special Master entered his report holding HRP and Chanen jointly and severally liable for $3.6 million. Greenfield did not inform HRP of the Special Master’s findings.
In October and November 1981, Greenfield argued to the District Court, inter alia, that the Special Master was wrong in finding that Chanen should be held liable to Form-Eze and Inryco. In addition to his previously asserted “disclosed principal” argument, Greenfield argued that Form-Eze had elected to release Chanen, thereby leaving HRP solely liable for the judgment. Greenfield had never informed HRP that he would argue, contrary to Form-Eze’s contentions, that Form-Eze had elected to hold HRP solely liable.
On February 4, 1982, Greenfield had a package hand-delivered to Barry Shapiro which informed HRP of what had transpired since Greenfield’s last communication two- and-one-half years earlier. However, Greenfield’s cover letter still did not tell HRP that the Special Master had recommended a $3.6 million judgment against HRP; the letter merely stated that “the short term economic consequences of the report being adopted by the Federal District Judge would be significant to the defendants and to Arizona Title Insurance Company.” The letter suggested that a meeting be scheduled between HRP, Chanen, and Arizona Title “for the purpose of reviewing this matter in its current posture” “[bjecause there are varying interests involved on behalf of all defendants.” Enclosed in the package were several pleadings that Greenfield had filed without HRP’s knowledge. When Barry Shapiro read the package and realized that he, his father, his brother, and his cousin each faced personal liability of $3.6 million, he “stuck [his] head in the trash bucket and threw up.” After receiving the package, Shapiro was unable to reach Greenfield because Greenfield had left town prior to sending thе package and was unavailable to take Shapiro’s calls.
Aware of the conflict for the first time, HRP immediately retained new counsel to represent it before the District Court which was then reviewing the Special Master’s findings. HRP’s new counsel tried to correct Greenfield’s errors and omissions and attempted to have the District Court re-open the evidence to admit the AIA contract. However, as later explained by the Ninth Circuit Court of Appeals, HRP’s efforts came too late because the Special Master’s trial proceedings had already closed.
HRP’s new counsel was, however, successful in having the judgment reduced from the $3.6 million recommended by the Special Master to the $1.6 million ultimately ordered by the Ninth Circuit. HRP eventually paid $265,836.40 to Form-Eze and $546,071.87 to Inryco.
E. Procedural History of This Legal Malpractice Action
HRP filed this action against Greenfield, CG & I, and Winston & Strawn on June 24, 1988, alleging that Greenfield had acted negligently and breached his contractual and fiduciary duties to HRP in the Form-Eze litigation. HRP later amended its complaint to seek punitive damages.
Prior to trial, Greenfield and the two malpractice insurance carriers who provided coverage prior to March 1, 1981, settled HRP’s claims against Greenfield and CG & I for $1,500,000. HRP allocated $1 million of the settlement to HRP’s punitive damage claim against CG & I and Greenfield.
Winston & Strawn proceeded to trial. At the close of the evidence, the court instructed the jury, over Winston & Strawn’s objection, that Winston & Strawn was responsible for any acts of Greenfield or CG & I which occurred after July 1, 1978. The court also instructed the jury, again over Winston & Strawn’s objection, that it could award punitive damages only for Greenfield’s conduct after March 1, 1981, the date he joined Winston & Strawn. The jury found for HRP and awarded $1,238,568 in compensatory dаmages and $3,000,000 in punitive damages against Winston & Strawn.
The trial court awarded $667,055.01 in prejudgment interest on HRP’s compensatory damages and entered its judgment on September 4, 1991. Winston & Strawn filed a Motion For A New Trial Or, In The Alternative, To Alter Or Amend Judgment on September 19,1991. The trial court denied Winston & Strawn’s Motion but ruled that the pre-trial settlement payments, although not a proper subject of Winston & Strawn’s Motion, should operate as a partial satisfaction of HRP’s judgment against Winston & Strawn.
Winston & Strawn filed a timely Notice of Appeal and HRP timely cross-appealed. We have jurisdiction pursuant to Ariz.Rev.Stat. Ann. (“A.R.S.”) section 12-2101(B), (C), (E) and (F)(1) (1994).
II. ISSUES AND CROSS-ISSUES
A Should the punitive damage award against Winston & Strawn be reversed or reduced?
1. Can Winston & Strawn be liable in punitive damages for the conduct of its partner Greenfield under a theory of respondeat superior?
2. Did Winston & Strawn proximately cause HRP’s compensatory damages after March 1, 1981?
3. Was there clear and convincing evidence of Greenfield’s evil mind?
4. Did the trial court’s post-trial review of the punitive damage award satisfy due process standards?
5. Did the trial court abuse its discretion in denying Winston & Strawn a remittitur?
B. Did the trial court err in ruling that, as a matter of law, Winston & Strawn assumed CG & I’s contingent tort liability?
C. Did the trial court improperly instruct the jury on the applicable negligence standard?
D. Was HRP entitled to prejudgment interest?
E. Did the trial court err in crediting, as partial satisfaction of the jury’s awardagainst Winston & Strawn, settlement payments received by HRP prior to trial from CG & I and Greenfield?
III. DISCUSSION
A. Punitive Damages
1. Vicarious liability
The trial court recognized that “the award of punitive damages ... against Winston & Strawn was based solely upon a theory of respondeat superior. There was no claim that Winston & Strawn acted negligently or punitively other than through the actions of Greenfield.” Winston & Strawn argues that under Arizona law, a wholly passive employer cannot be liable for punitive damages under the respondeat superior doctrine. We disagree and hold that Arizona’s partnership statutes and common law permit punitive damages to be awarded vicariously against Winston & Strawn for acts that Greenfield performed in the ordinary course of the partnership’s business.
Arizona’s legislature has adopted the Uniform Partnership Act which provides in part: explicit imposition of vicarious liability for “any penalty.” Although Arizona’s courts have never squarely addressed whether UPA section 13's reference to “any penalty” includes punitive damages, this court has interpreted the statute to impose vicarious liability on partners for damages that are punitive in nature. Ayres v. Red Cloud Mills, Ltd.,
Where, by any wrongful act or omission of any partner acting in the ordinary course of the business of the partnership ... loss or ipjury is caused to any person, not being a partner in the partnership, or any penalty is incurred, the partnership is liable therefor to the same extent as the partner so acting or omitting to act.
A.R.S. § 29-213 (1989) (“UPA section 13”) (emphasis added). Winston & Strawn contends that this section provides vicarious liability only for compensatory damages, and that it is silent on the issue of punitive damages. This contention overlooks the statute’s
Winston & Strawn next argues that UPA section 13’s “any penalty” language is too ambiguous, and therefore UPA section 13 has not supplanted Arizona’s common law on the vicarious imposition of punitive damages. Wyatt v. Wehmueller,
Winston & Strawn’s argument in this respect is inconsequential because there is no conflict between UPA section 13 and Arizona’s common law. Arizona’s courts have long held that a business may be vicariously liable in punitive damages for acts an employee commits in furtherance of the business and within the scope of employment. Western Coach Corp. v. Vaughn,
Winston & Strawn asserts that recent appellate decisions have eroded the Vaughn/ Boyce rule allowing respondeat superior liability for punitive damages, and that Arizona has now adopted the Restatement rule which requires a showing of some fault by the employer or that the employee served in a managerial capacity.
On this point the dissent raises the “issue” of whether Greenfield was a “managerial agent” of Winston & Strawn and then admits that the issue was nоt litigated in the trial court and would only become relevant if Arizona adopted Restatement of Torts (Second), section 909, which it has not. In its opening statement, Winston & Strawn proclaimed:
And I’ll make the deal with you right now if you think he [Greenfield] lacks integrity and tried to prefer one client over the other and did so and hurt HRP and Shapiro, find against him. Find against Winston & Strawn.
The position taken by Winston & Strawn at trial and the position taken by it on appeal and apparently accepted by the dissent are irreconcilable. The “managerial agent” issue does not comport with Arizona law and the trial court instructed the jury that Winston & Strawn was responsible as a matter of law for any acts committed by CG & I after July 1978.
In Wiper, the Arizona Supreme Court accepted review “to clarify the relationship between punitive damages and the doctrine of respondeat superior.”
Nor do the three decisions of this court that Winston & Strawn cites change Arizona’s law. Jacobson was not a scope and course of employment case, but rather involved the family purpose doctrine which imputes liability for a child’s negligent operation of a vehicle to the child’s parents. In holding that a negligent driver’s parents could not be punitively liable, we distinguished the family purpose doctrine from the respondeat superior doctrine. We reasoned that vicarious punitive liability is justified under respondeat superior because “an employer receives some economic benefit from the employee’s labor and specifically defines for the employee the scope of employment.”
In White v. Mitchell the jury was instructed that to be liable in punitive damages, the employer must have “consciously pursued a course of conduct knowing that it created a substantial risk of significant harm to others.”
Nor does the supreme court’s decision in Wyatt mean that Arizona has rejected the Vaughn/Boyce rule and adopted the Restatement view. Wyatt held that clients whose attorney filed a groundless lis pendens notice could not be held liable for statutorily authorized damages that were punitive in nature where the clients had no knowledge and did not consent to the attorney’s action.
To summarize, under Arizona’s version of UPA section 13 and our common law doctrine of respondeat superior, Winston & Strawn can be vicariously liable in punitive damages for acts that its partner Greenfield performed in the ordinary course of the partnership’s business. Arizona has not adopted the Restatement view requiring some employer participation or acquiescence in the employee’s acts or that the employee was a manager of the employer.
2. Did Winston & Straum proximately cause HRP’s compensatory damages after March 1, 1981 ?
A plaintiff must be entitled to compensatory damages before being entitled to punitive damages. Wyatt,
Winston & Strawn contends there is no evidence that HRP sustained compensatory damages due to Greenfield’s conduct after he joined the firm on March 1, 1981. By then, Winston & Strawn argues, HRP had already sustained all its damages stemming from the Form-Eze litigation because the Special Master announced on December 8, 1980, his preliminary findings that HRP and Chanen were jointly and severally hable. Winston & Strawn argues there was nothing it could have done after March 1, 1981, to relieve HRP of liability to Form-Eze and Inryco.
Viewing the record in the light most favorable to upholding the jury’s verdict, we conclude there is substantial evidence that Winston & Strawn proximately caused HRP to sustain actual damages in the Form-Eze litigation. The evidence included the AIA contract which arguably could have provided HRP with valid defenses agаinst Form-Eze and Inryco and cross-claims against Chanen. According to Greenfield, the Special Master’s findings of December 8, 1980, were only tentative and “preliminary.” The Special Master requested additional briefing, and the parties still had an opportunity to change the outcome of the case. Winston & Strawn, through Greenfield, represented HRP for more than six months before the Special Master entered his final report. An expert witness for HRP testified that during this period, Greenfield’s conflict should have been disclosed and Winston & Strawn should have moved the Special Master to re-open the evidence to allow HRP to advance its defenses and cross-claims under the AIA contract. Instead, Winston & Strawn, through Greenfield, persisted in arguing that Chanen should not be held liable because Chanen was the disclosed agent of HRP. Thus, the jury could have reasonably concluded that but for Winston & Strawn’s legal malpractice from March 1 to September 22, 1981, HRP could have significantly reduced its liability in the Form-Eze litigation.
Another source of HRP’s compensatory damages is the attorneys’ fees it paid in the Form-Eze litigation. Unaware of Greenfield’s fundamental conflict of interest, HRP paid Winston & Strawn’s fees through advances from Arizona Title. After learning of the conflict, HRP hired independent counsel in an attempt to correct Greenfield’s errors and omissions. The jury properly awarded these amounts as part of HRP’s actual damages, and these damages satisfy the predicate requirement for an award of punitive damages. See Asphalt Engineers,
The dissent argues that the damage to HRP was done before March 1, 1981. After the Special Master had ruled on liability, Greenfield still had a conflict of interest. While Greenfield probably wanted to keep damages as low as possible for the favored client—Chanen, HRP continued to be injured by Greenfield and Winston & Strawn. HRP, through Arizona Title, was still paying legal fees to Winston & Strawn for Greenfield’s non-representation—fees that HRP would undoubtedly have refused to pay had they then known of Greenfield’s duality. Indeed these legal fees were a recognized part of HRP’s compensatory damages. Furthermore, had Greenfield made HRP aware of the situation, HRP could have retained another firm to attempt to change the ruling of the Special Master as to HRP based on Greenfield’s failure to provide HRP with a legitimate defense.
Contrary to the dissent’s position, there was ample justification for vicarious liability after March 1,1981, as to Winston & Strawn. After all, Greenfield brought, as part of his book of business, two major clients to Winston & Strawn—HRP and Chanen. Winston & Strawn benefited accordingly by collecting substantial legal fees from both.
3. Was there sufficient evidence of Greenfield’s evil mind?
To recover punitive damages, a plaintiff must prove by clear and convincing evidence that the defendant engaged in aggravated and outrageous conduct with an “evil mind.” Thompson v. Better-Bilt Aluminum Prod. Co.,
Winston & Strawn attacks the jury’s $3 million punitive damages award by arguing that there was no substantial evidence of malpractice by Greenfield, let alone “evil mind.” Under Winston & Strawn’s view of the evidence, Greenfield vigorously asserted HRP’s “best defense” that HRP was not liable because Form-Eze had breached its contract. That the Special Master disagreed with Greenfield’s theory is not evidence of legal malpractice or of Greenfield’s “evil mind.” Winston & Strawn further argues that Greenfield fully revealed his “disclosed agent” strategy to HRP’s Barry Shapiro at the beginning and throughout the lawsuit, and that Shapiro did not object. Winston & Strawn claims that Greenfield raised the issue of whether HRP should have separate counsel on several occasions. Lastly, Winston & Strawn contends that Greenfield had no motive to harm HRP because he socialized with the Shapiro family and had previously done legal work for them.
Winston & Strawn’s argument overlooks several important facts which the jury did not overlook. There is clear and convincing evidence that in representing both HRP and Chanen, Greеnfield consciously disregarded HRP’s rights under the AIA contract and exposed HRP’s partners to unjustifiable risks of personal liability. Greenfield never
There is also clear and convincing evidence that Greenfield had a motive to sacrifice HRP in order to protect Chanen. HRP filed for bankruptcy at approximately the same time that Greenfield assured Form-Eze’s counsel that he had resolved any conflict arising from the joint representation of HRP and Chanen. HRP was struggling to pay its legal bills and had lost its only significant asset, the hotel, in a foreclosure sale. Greenfield recommended that HRP retain separate counsel not because of the conflict in the joint representation, but because of HRP’s bankruptcy. In contrast to HRP, Chanen was the third or fourth largest construction company in Arizona and generated $48,000 in legal fees for Greenfield’s firm during 1980. Greenfield was on Chanen’s board of directors. In addition, there is clear and convincing evidence that Greenfield actively concealed his efforts throughout the Form-Eze litigation. From the outset, Greenfield was aware of the conflict between HRP and Chanen; but he never disclosed the conflict to HRP and never obtained a waiver. Greenfield did not communicate with HRP from September 1979 to February 1982. Greenfield waited five months after the Special Master’s decision to inform HRP’s partners that they were liable for a $3.6 million judgment. Even then, Greenfield had a messenger deliver this devastating news while he left town.
Based upon this evidence, the jury’s finding that Greenfield acted with an evil mind is reasonably supported. See Elliott v. Videan,
A Post-trial review of the punitive damage award under Due Process standards.
“A decision to punish a tortfeasor by means of an exaction of exemplary damages is an exercise of state power that must comply with the Due Process Clause of the Fourteenth Amendment.” Honda Motor Co. v. Oberg, — U.S. -,-,
In Haslip, the Supreme Court held that Alabama’s method for awarding and reviewing punitive damages “imposes a sufficiently definite and meaningful constraint on the discretion of Alabama factfinders.”
(a) whether there is a reasonable relationship between the punitive damages award and the harm likely to result from the defendant’s conduct as well as the harm that actually has occurred; (b) the degree of reprehensibility of the defendant’s conduct, the duration of that conduct, the defendant’s awareness, any concealment, and the existence and frequency of similar past conduct; (c) the profitability to the defendant of the wrongful conduct and the desirability of removing that profit and of having the defendant also sustain a loss; (d) the “financial position” of the defendant; (e) all the cоsts of litigation; (f) the imposition of criminal sanctions on the defendant for its conduct, these to be taken in mitigation; and (g) the existence of other civil awards against the defendant for the same conduct, these also to be taken in mitigation.
Id. at 21-22,
Contrary to Winston & Strawn’s assertions, Haslip does not require that every state’s trial and appellate courts conduct a detailed review of punitive damage awards identical to Alabama’s review. Haslip declined to “draw a mathematical bright line between the constitutionally acceptable and the constitutionally unacceptable that would fit every case.” Id. at 18,
Arizona’s method for imposing punitive damages provides several procedural protections to assure that an award of punitive damages is justified and reasonable. Hawkins v. Allstate Ins. Co.,
Winston & Strawn has received full due pocess on the question of punitive damages. The trial court’s Recommended Arizona Jury Instruction (“RAJI”) for punitive damages, which required HRP to establish Greenfield’s evil mind by clear and convincing evidence, restricted the jury’s discretion even more than the instructions the Supreme Court approved of in Haslip and TXO Production Corp. v. Alliance Resources Corp.,
Winston & Strawn received a full hearing on its Motion For New Trial. The trial court first found that clear and convincing evidence supported the award of punitive damages. Then, regarding Winston & Strawn’s contention that the punitive damages award was excessive, the court ruled:
Although the amount of punitive damages awarded is large, based on the evidence presented concerning the financial worth of the Defendant, the amount can not be said to be indicative of passion or prejudice, but [based] upon the jury’s consideration of the instruction and the purpose for which punitive damages are assessed.
The trial court’s post-verdict review satisfied due process. TXO Prod Corp.,
On appeal, we have considered Winston & Strawn’s arguments in detail and reviewed the allegedly excessive punitive damages award under Hawkins’ criteria. The award is proportionate to Winston & Strawn’s financial position; it represents approximately 3.1 percent of the firm’s gross revenues for 1990. The record supports the jury’s determination that for almost a year Winston & Strawn, through Greenfield, consciously disregarded its client’s interests, tried to shift all liability for a potential $3.6 millón judgment from a more favored client to HRP, and concealed this conduct from HRP. The punitive damage award is less than half of what HRP requested, less than three times HRP’s compensatory damages, and significantly less than the liability that Greenfield sought to have HRP bear.
5. Is Winston & Strawn entitled to a remittitur?
Winston & Strawn requests remittitur of the punitive damages award, arguing that HRP inflamed the jury during its closing argument with references to the AzScam and savings and loan scandals, and characterizations of Winston & Strawn as “huge,” “powerful,” and “rich.”
We hold that the trial court did not abuse its discretion when it denied Winston & Strawn’s request for remittitur. As discussed above, the Hawkins factors fully support the verdict and the trial court’s decision not to interfere with it.
B. Did Winston & Strawn Assume CG & I’s Contingent Tort Liability?
Prior to trial, Winston & Strawn filed a consolidated Motion For Partial Summary Judgment And Motion In Limine requesting a ruling that it had no liability for CG & I’s acts in the Form-Eze case prior to the merger on March 1,1981, and to exclude evidence of CG & I’s pre-merger acts. Because the Motion For Partial Summary Judgment was filed too late, the trial court ordered sua sponte that it would consider only the Motion In Limine. However, HRP argued that the summary judgment issues were inextricably intertwined with the evidentiary issues; the trial court permitted HRP to file a response to the consolidated motion. The trial court denied the Motion In Limine holding that “pursuant to principles of partnership law and under the agreement of the parties, Winston & Strawn is liable for any alleged malpractice for which the Craig, Greenfield & Irwin partnership had liability.” At the close of the evidence, the court instructed the jury that Winston & Strawn was responsible as a matter of law for any acts committed by CG & I after July 1, 1978.
Winston & Strawn argues that under the Uniform Partnership Act (“UPA”), A.R.S. sections 29-201 to -244 (1989), Winston & Strawn was only liable for those CG & I liabilities which it contractually assumed. According to Winston & Strawn, whether it assumed liability for HRP’s malpractice claim was a factual issue which should have gone to the jury. We disagree.
Winston & Strawn’s сonsolidated motion asserted: “On March 1, 1981, the firms of Craig, Greenfield & Irwin and Winston & Strawn merged their practices in Phoenix, Arizona under the name ‘Winston & Strawn’____” Legally, three things happened upon the merger. First, the “old” Winston & Strawn dissolved when it accepted the incoming CG & I partners. See A.R.S. §§ 29-229, 231; Johnson v. Hill, 1 Ariz.App. 290, 291,
The dispositive issue is the extent of the new combined partnership’s responsibility for the liabilities of the dissolved partnerships, the former Winston & Strawn and the former CG & I. Winston & Strawn asserts that A.R.S. section 29-241(D) (“UPA section 41(4)”) shields it from liability for HRP’s malpractice claim against CG & I because Winston & Strawn did not promise to assume that liability. UPA section 41(4) provides:
When all the partners ... assign then-rights in partnership property to one or more third persons who promise to pay the debts and who continue the business of the dissolved partnership, creditors of the dissolved partnership are also creditors of the person or partnership continuing the business.
The Official Comment provides that UPA section 41(4) “does not apply to the ease where the third person or persons do not promise to pay the debts of the dissolved partnership. In that case the creditors of the dissolved partnership have no claim on the partnership continuing the business or its property....” 6 U.P.A. § 41, at 513 (1969).
We conclude, however, that UPA section 41(4) is inapplicable to the CG & I—Winston
When a partnership such as CG & I dissolves “without liquidation of partnership affairs, creditors of the first or dissolved parti nership are also creditors of the partnership so continuing the business.” A.R.S. § 29-241(A) (“UPA section 41(1)”). The Official Comment to UPA section 41(1) explains that this subsection is intended to apply precisely to situations like the CG & I-Winston & Strawn merger:
The paragraph as a whole, as well as [the] entire section, is based on the opinion that when there is a continuous business carried on first by A, B, and C, and then by A, B, C and D, or by B or C ... or by B, C, and D, without any liquidation of the affairs of A, B, [and] C, both justice and business convenience require that all the creditors of the business, irrespective of the exact grouping of the owners at the times their respective claims had their origin, should be treated alike, all being given an equal claim on the property embarked in the business.
6 U.P.A. § 41, at 512. In making the creditors of the first partnership creditors of the second, this subsection prevents an assignment of the first partnership’s property from affecting the rights of the first partnership’s creditors. Id. We hold that the trial court properly charged Winston & Strawn with CG & I’s contingent tort liability under UPA section 41(1) because CG & I’s affairs were not liquidated upon the merger.
C. Did The Trial Court Improperly Instruct The Jury On The Applicable Negligence Standard?
Winston &. Strawn complains that the trial court erred by refusing a tendered instruction which articulated the causation element in the “but for” language from legal malpractice caselaw. See Molever,
We hold that Winston & Strawn waived all but fundamental error by not objecting to the jury instruction. We further hold that if there was any error, it was not fundamental because the instruction gave the basic outline of the law on legal malpractice. Bradshaw,
D. Was HRP Entitled To Prejudgment Interest?
A party’s entitlement to prejudgment interest depends on whether his or her claim is “liquidated.” Schade v. Diethrich,
Winston & Strawn argues that HRP's compensatory damages were not liquidated because the jury had discretion to hold Winston & Strawn liable for less than the whole amount of HRP’s liability to Form-Eze and Inryco. The trial court instructed the jury that Winston & Strawn was only responsible for Greenfield’s acts after July 1, 1978. Thus, Winston & Strawn argues, the jury could have found that some or all of HRP’s liability to Form-Eze and Inryco was caused by Greenfield prior to that date and that Winston & Strawn was not responsible for that liability.
This argument ignores the fact that although Winston & Strawn’s liability for HRP’s compensatory damages was disputed, the amount of those damages was not. “The mere fact that the parties dispute a claim does not defeat the allowance of interest.” La Paz County v. Yuma County,
E. Did The Trial Court Err In Crediting, As Partial Satisfaction Of The Jury’s Award Against Winston & Strawn, Settlement Payments Received By HRP Prior To Trial From CG & I And Greenfield?
Months prior to trial, HRP reached a settlement with CG & I and Greenfield, or more specifically, with their two malpractice insurers who provided coverage for the period before March 1, 1981, when CG & I merged with Winston & Strawn. HRP allocated $1 million of the settlement to punitive damages, and the remaining $500,000 to compensatory damages.
Winston & Strawn did not raise any credit issues between the May verdict and the September entry of final judgment, although it did raise other objections during this period. Winston & Strawn’s first claim to a credit appeared in its post-judgment Motion For New Trial Or, In The Alternative, To Alter Or Amend Judgment. The trial court ruled that although the credit issue was not properly a part of the motion, the pre-trial settlement payments operated as partial satisfactions of the compensatory and punitive damage awards against Winston & Strawn.
1. Credit against the compensatory award
On cross-appeal, HRP argues that when a co-defendant makes a payment on a plaintiff’s claim prior to the entry of the final judgment, a non-settling defendant who knows of that payment must advance its request for credit before the judgment is entered. Under the unique facts in this case we cannot agree and therefore we affirm the trial court’s grant of credit on the compensatory damages.
In Arizona, a joint tortfeasor is entitled to have the amount of another joint tortfeasor’s settlement applied in reduction of the plaintiff’s claim. A.R.S. § 12-2504 (1994); Egurrola v. Szychowski,
Public policy demands that there be an end to litigation. The common good of societyas a whole and of the litigants in particular, requires that there be an end to strife for the purpose of producing certainty as to individual rights and to promote dignity and respect for judicial proceedings.
Lee v. Johnson,
Winston & Strawn cites American Home Assurance Co. v. Vaughn,
We do not think that Vaughn is dispositive. Vaughn did not address whether a defendant’s post-judgment motion to reduce damages comes too late, and apparently no one raised this issue. Moreover, the two Arizona Supreme Court cases which Vaughn cited in support of its holding actually indicate that a defendant must raise credit issues before the court enters the judgment. See Adams v. Dion,
Our supreme court directly addressed this issue in Evans v. Valley Radiologists Ltd.,
In this case we cannot apply this holding because the trial judge instructed the jury that they should determine the full amount of damages suffered by HRP and that she, as the trial judge, would prevent any “double recovery.” The Settlement Agreement between HRP and CG & I and its partner Greenfield (or more specifically their two malpractice insurers) stated:
Nothing 'in this Settlement Agreement shall release, waive or impair any claims, rights or causes of action HRP and the two insurers or any of them have now or may have in the future against Winston & Strawn, its individual partners and its professional liability insurer for the lawsuit.
It appears that the trial judge reasoned that the pre-trial settlements could be treated, pursuant to Rule 60(c)(5), as a partial satisfaction of the judgment entered against Winston & Strawn. Thus the trial judge conceptualized the final judgment which was against Winston & Strawn only, as being the same as a judgment, jointly and severally, against Winston & Strawn, Greenfield, and
On motion and upon such terms as are just the court may relieve a party or his legal representative from a final judgment, order or proceeding for the following reasons: (5) the judgment has been satisfied, released or discharged, or a prior judgment on which it is based has been reversed or otherwise vacated, or it is no longer equitable that the judgment should have prospective application.
To apply Rule 60(c)(5) is to avoid a double recovery of the same damages in this case since the jury returned compensatory damages in the exact amount of $1,288,568, which was basеd “to the dollar” on the total amount HRP paid to satisfy the judgment entered against it in the Form-Eze litigation, plus attorneys’ fees incurred.
We agree that the better practice would have been for Winston & Strawn to have pled the settlement as an affirmative defense pursuant to Rule 8(c), Arizona Rules of Civil Procedure. Winston & Strawn did not do so. However the judge instructed the jury to find the full amount of compensatory damages suffered by HRP and she would prevent any double recovery by virtue of the settlement. When HRP introduced a post-trial claim that Winston & Strawn was not entitled to an offset, the trial court observed:
And frankly, I was really surprised to read that there was some claim that there was no entitlement to a credit because of a procedural problem on at least the half a million dollars that was received by plaintiffs to settle the compensatory damages claim against Greenfield and Craig, Greenfield and Irwin.
I thought that this was just absolute that everybody understood and there was going to be no question that Mr.—that HRP can’t recover twice under any circumstances, and that is in fact what the result would be if I don’t apply the credit.
The trial court committed no error in keeping its promise to the jury and rejecting the claim by HRP in regard to the compensatory damages. This part of the cross-appeal is affirmed.
2. Credit against the punitive award
We reverse the credit for punitive damages. After the trial the trial court assumed that because the respondeat superi- or theory for Greenfield’s conduct was the only basis for holding Winston & Strawn liable, any settlement payments for Greenfield’s conduct reduced Winston & Strawn’s liability. This assumption was wrong as a matter of law because punitive damages may be assessed against an employee and his employer, and even though the employer is liable only in respondeat superior, the employer will be liable for the separate assessment against it. Wilson v. Riley Whittle, Inc.,
The dissent makes oddly contradictory arguments—the first being that all damage done to HRP was done before March 1,1981, and the second being that Winston & Strawn should get $1 million credit for damages which it did not cause under the dissent’s theory. Before trial, the trial court expressed concern about a double recovery and advised the jury that she, as the judge, would see that no double recovery of the compensatory damages in favor of HRP occurred. She avoided the double recovery problem as to punitive damages by instructing the jury that it could only find punitive damages against Winston & Strawn for acts occurring after March 1, 1981. Winston & Strawn assumed CG & I’s contingent tort liability for compensatory damages purposes only.
As to the dissent’s point regarding final argument, both parties in this case had very experienced, competent counsel who knew well what they were doing and what trial advocacy is all about. However, our standard of review аs an appellate court is to consider the facts and all inferences in the light most favorable to sustaining the jury verdict and resulting judgment as we stated in the beginning of this opinion. There is no question that this trial judge did an excellent job with a very complex piece of litigation.
IV. CONCLUSION
We affirm the jury’s award of compensatory and punitive damages to HRP. We also affirm the trial court’s award of prejudgment interest. We affirm the trial court’s grant of credit to Winston & Strawn for $500,000 pretrial settlement payments by Greenfield and CG & I for HRP’s compensatory damages. However, we reverse the trial court’s grant of credit for $1 million against the jury’s punitive damage award. Accordingly, we remand to the trial court for entry of judgment in accordance with this opinion. Pursuant to A.R.S. section 12-342, we award HRP its costs on appeal upon compliance with Rule 21, Arizona Rules of Civil Appellate Procedure. Finally, we direct the Clerk of this Court to send a copy of this opinion to the State Bar of Arizona Disciplinary Commission for its review.
Notes
. Neither Form-Eze nor Inryco had alleged that Chanen was an agent for a disclosed principal. Under Arizona law, the agent of a fully disclosed principal is not liable in contract for the principal’s breach. Ferrarell v. Robinson,
. HRP eventually repaid Arizona Title all the attorneys’ fees plus interest, a total of over $100,-000.
. On July 1, 1978, Greenfield left Snell & Wilmer and formed CG & I.
. The trial was originally set for December 1979. Although the trial date was continued twice, Greenfield did not inform HRP of the new dates.
. Likewise, in an earlier motion fоr summary judgment on Chanen’s behalf, Greenfield had argued that because "Chanen was acting as agent for a disclosed principal, Chanen has no liability to [Form-Eze or Imycoj.” Both FormEze and Inryco opposed the motion and the district court denied it.
. See Bromberg & Ribstein On Partnership § 4.07 (1991) ("Punitive damages have been held recoverable against the partnership, as long as the act was committed in the ordinary course of the partnership business. This is consistent with the provision in U.P.A. § 13 for partnership liability for 'any penalty’ to the same extent as the acting partner and with corporate liability for punitive damages.”); Scott Rowley, 1 Rowley On Partnership § 13.1, at 373 (2nd ed. 1960); Restatement (Second) of Agency, ch. 7, Scope Note at 454 (1958) ("[For the puipose of imposing punitive damages], the conduct of any member of a partnership ... can be treated as the conduct of a principal.”).
. See Meleski v. Pinero Int’l Restaurant, Inc.,
. See In re WPMK Corp.,
. Restatement (Second) of Torts § 909 (1979) provides:
Punitive damages can properly be awarded against a master or other principal because of an act by an agent if, but only if,
(a) the principal or a managerial agent authorized the doing and the manner of the act, or
(b) the agent was unfit and the principal or a managerial agent was reckless in employing or retaining him, or
(c) the agent was employed in a mаnagerial capacity and was acting in the scope of employment, or
(d) the principal or a managerial agent of the principal ratified or approved the act.
See also Restatement (Second) of Agency § 217 C (1957).
. “Agency principles restrict recovery to actual damages unless some participation, or at least acquiescence, is shown on the part of the principal.”
. Even if Arizona followed the Restatement view, Winston & Strawn could still be liable in punitive damages because it employed Greenfield in a managerial capacity and he managed HRP's case. Arizona defines a "managing agent,” inter alia, as a person who is invested with general powers to exercise judgment and discretion in dealing with a firm's matters. Slow Dev. Co. v. Coulter,
. The Haslip jury was instructed that it could award punitive damages if it was “reasonably satisfied from the evidence" that the defendant committed fraud.
. We note that the Supreme Court recently held that Oregon's clear-and-convincing standard of proof and detailed jury instructions alone do not adequately constrain a jury’s discretion to award punitive damages; punitive awards must be subject to judicial review. Honda Motor Co., — U.S. at -,
In contrast, Arizona provides detailed and meaningful post-verdict judicial review in its trial, and appellate courts. See Hawkins,
. Cf. TXO Prod. Corp.,
. Winston & Strawn's counsel made similar remarks about HRP throughout the trial. His opening statement referred to one of HRP’s partners as a "multi-millionaire.” During testimony, when referring to another of HRP’s partners, he stated "They had money. They had a lot of money. They’re multi-millionaires, aren't they?” and ”[H]e could walk in this courtroom and write a check for a million dollars on anything he wanted to.” In his closing argument, he characterized Sam Shapiro as "one of the most influential, one of the richest, one of the most powerful men in the state of Arizona,” and HRP as "Some very rich people [who] decided to build a hotel ... with [the] help of their very rich friend to make a lot of money.”
. Of course if a judgment is entered before a party becomes aware of facts whiсh require a new trial or relief from the judgment, the party can bring appropriate post-judgment motions. Ariz.R.Civ.P. 59(a) (allowing for new trial when party discovers material evidence which could not have been discovered and produced at trial); Ariz.R.Civ.P. 60(c) (allowing for relief from judg
Winston & Strawn does not dispute that it was fully aware of its co-defendants’ pre-trial settlemente, and it offers no explanation for its failure to request credit prior to the entry of judgment.
Concurrence Opinion
concurring in part, dissenting in part.
I concur in the decision to affirm the compensatory damages offset; in all other regards, I respectftilly dissent. In my opinion, the $3 million punitive damages penalty imposed on Winston & Strawn is both unconstitutional and unsupported by the evidence.
A. Punitive Damages Offset: I would reverse the punitive damages award. But if affirming, I would also affirm the punitive damages offset, for reasons explained by the trial court:
There is no evidence upon which punitive damages could be independently assessed against Winston & Strawn for any conduct separate and apart from the conduct of Greenfield. In this Court’s view by agreeing to accept $1 million in punitive damages from Greenfield, the Plaintiff is alsorequired to credit that $1 million against the punitive damage award against Winston & Strawn. To allow recovery of the full $8 million would be allowing a double recovery of one-third of the punitive damages assessed because of Greenfield’s conduct. The settlement effects a partial satisfaction of the punitive damages as well.
The reversal of the punitive damagеs offset gives HRP what the trial court regarded as a $1 million double recovery, and it penalizes Winston & Strawn $1 million more than the trial court had in mind when it denied the motion for remittitur. In light of these circumstances, I think it appropriate for counsel to request that the trial court reconsider the motion for remittitur.
B. Vicarious Liability: I agree that Arizona case law allows punitive damages for respondeat superior liability. I second the concerns expressed by the trial court regarding that law:
While this Court has substantial doubts as to whether the purposes behind the award of punitive damages are served by the application of respondeat superior, particularly when the party whose conduct is the basis for the award of punitive damages is an experienced lawyer whose conduct is not subject to the same kind of supervision and close scrutiny as the conduct of many other types of employees, this Court is bound by appellate authority on this issue.
Winston & Strawn’s argument that Arizona law should evolve to a position more in line with Restatement (Second) of Torts Section 909 (1979) is serious. What happened in this trial and appeal to Winston & Strawn is reason enough to reconsider Arizona law regarding vicarious liability for punitive damages.
If Greenfield was a “managerial agent” of Winston & Strawn, the partnership would be vicariously liable in punitive damages for his evil-minded conduct, even under Section 909. Whether Greenfield was a managerial agent, however, was never litigated; it was mooted by the trial court’s directed verdict on vicarious liability. But the issue appears triable, if Section 909 becomes the law in Arizona.
C. Evidence: Assuming that the law allows punitive damagеs against Winston & Strawn here, the evidence does not support a $3 million penalty.
1. The damage was done before March 1, 1981: The trial court instructed the jury, “In deciding about punitive damages, you may only consider the actions of Mr. Greenfield that took place after he joined Winston & Strawn on March 1, 1981.” (Although the start-date for compensatory damages was July 1, 1978, none of the parties complain about a March 1,1981 start-date for punitive damages, so there is no issue on appeal about the correctness of that date.)
I submit that the record compels the conclusion that the evil-minded conduct of Greenfield had done its damage to HRP pri- or to March 1, 1981. True, Greenfield earned attorneys’ fees after March 1, 1981, and can be faulted for certain behaviors after that date—such as the untimely and insensitive way in which he disclosed the Special Master’s decision to HRP. But the real damage to HRP was done when the Special Master announced his liability verdict on December 8, 1980—three months before Greenfield joined Winston & Strawn.
The underlying lawsuit against HRP and Chanen was complex only in regard to damages, Liability toned on the testimony of one Chanen employee and one Form-Eze employee, and the question whether Chanen threw Form-Eze off the job on November 19,1974. Trial was in March 1980—one year before Greenfield joined Winston & Strawn. The Special Master was the Honorable R. Porter Murry, a retired superior court judge. On December 8, 1980, Judge Murry announced that he needed more help from counsel in calculating damages, but he ruled from the bench on liability.
The jury in the Winston & Strawn trial was read numerous stipulations of fact, and stipulation 45 provided: “On December the 8th, 1980, the Special Mastеr stated at a hearing that he had found in favor of FormEze and Inryco against both Chanen and HRP.” After that, the only question left unresolved—and it was a complicated question—was the amount of damages the Special Master was going to award Form-Eze and
2. Greenfield’s pro-Chanen contract defense failed: Greenfield has been faulted for arguing from the outset that Chanen was an agent and HRP was its disclosed principal and, therefore, any contract liability should be imposed solely on HRP. But the Special Master rejected this argument, the district court rejected it, and the Ninth Circuit rejected it. The district court adopted nearly all of the Special Master’s liability findings and conclusions, including:
6. Chanen was acting as the agent of HRP when it negotiated and entered into the Equipment Lease and Labor Guarantee, and when it executed the Letter of Clarification. This agency relationship, however, was not disclosed to Form-Eze until after these agreements had been entered into.
35. As a result of Chanen unilaterally dismissing [Form-Eze] from the jobsite, the Labor Guarantee, including the Security Interest, was terminated as of November 19, 1974.
68. Since Chanen’s agency was not disclosed as of the date on which the FormEze Equipment was leased, Chanen, or at Form-Eze’s election, HRP is liable to Form-Eze for [contract damages].
78. The defendants’ [Chanen and HRP] retention of the Inryco [formerly the Form-Eze] Equipment after July 30, 1975 was tortious, entitling Inryco under A.R.S. § 12-1301 et seq. to recover [tort damages].
3. HRP and Chanen were united in their tort defense: About eighty percent of the damages were tort damages for the wrongful detention of the forms. The Special Master awarded $3.6 million in damages, the district court reduced it to $800,000, and the Ninth Circuit raised it to $1.6 million. Of the Ninth Circuit award, the contract damages were about $20,000 to Form-Eze and about $290,000 to Inryco. The other $1.29 million was for wrongful detention of the forms, and fair market value of the forms.
There was much evidence that HRP was jointly hable with Chanen for the wrongful detention of the forms, and there was no evidence that Greenfield’s evil-minded conduct after March 1, 1981 was a cause of HRP’s tort liability. From the time of their 1975 detention, the forms were stored at a facility owned by an HRP partner. An August 6, 1975 letter from HRP (Barry Shapiro) to Chanen said, in part:
[S]ubject to my talking to Art Greenfield when he returns, it would appear that the direction which we should pursue with Form-Eze is to continue to hold the forms at National Metals as a means of leverage in collecting at least some of the excess dollars which you figure they owe us.
One of the exhibits at trial was a “Letter Agreement” signed by Chanen and HRP on October 6, 1977. This agreement provided that HRP would store the forms and that HRP would indemnify Chanen if it were later concluded that the detention of the forms was wrongful. (The agreement also provided that indemnification would not apply to damages attributable to the fault of Chanen.)
Another trial exhibit was a February 8, 1978 letter from Greenfield to HRP that began: “As you know, on numerous occasions in connection with this matter I have suggested that it would be more appropriate for the defendants other than Chanen Construction Company to be represented by separate counsel.” The letter discussed the “disclosed agent” theory (“[I]t has always been the situation that Chanen Construction Company was sued as the agent of the disclosed principal, HRP Hotel Company____”). The letter advised that Greenfield had been contacted by Inryco counsel with settlement overtures and that:
It seems imperative that the issue of utilization of the forms and perhaps even settlement of the entire litigation be vigorously pursued at this time. Accordingly, Iagain most strongly urge that your representation in connection with this matter be undertaken by counsel who is more familiar with the various aspects of the HRP Hotel situation than I.
The point here is this: If there was malpractice by Greenfield regarding what he did or did not advise HRP to do with the forms, the malpractice affected Chanen and HRP equally, it was not done with an evil-minded favoring of Chanen over HRP, and it was done long before March 1,1981—all of which means that there is no legal reason to penalize Winston & Strawn for that behavior.
4. HRP’s final argument: During trial there was little mention of Winston & Strawn, until final argument. HRP’s counsel, Robert A. Jensen, began his final argument by advising jurors that they could do nothing about the savings and loan scandals and they could do nothing about the AzScam scandal—except to pay higher taxes because of them—but they could do something about “one of the most powerful law firms in the country, Winston & Strawn.” Regarding the gross revenues of Winston & Strawn, counsel said: “They’re going to amaze you. They are riсh and powerful.” Counsel then referred for the first time in the trial to the Winston & Strawn financial statement (which was in evidence by stipulation) and advised that Winston & Strawn had over $97 million in gross revenues and that, if the jury were to impose, say, only $600,000 in punitive damages, “you’re not even going to get their attention. They’re not going to look up from their coffee. They’re not going to rearrange their European vacations.” Counsel then suggested penalizing Winston & Strawn one month’s “wages,” about $8 million. In rebuttal, counsel implored: “But please, I have watched all my life, representing plaintiffs as I do, the rich and the powerful get away with it. Don’t let it happen here.” Counsel closed with a suggestion that an award of punitive damages in the amount of “several million dollars” was appropriate.
HRP’s call to arms against rich and powerful lawyers who “get away with it” has thus far succeeded with one Arizona jury and two Arizona courts—despite the fact that Winston & Strawn did nothing wrong. During argument on the motion for new trial, the trial court stated: “[Ejverybody agreed that the only basis for punitive damages against Winston & Strawn was based on the conduct of Art Greenfield. It wasn’t a claim that he was negligently hired or retained or supervised ... punitive damages were based exclusively on his conduct, correct, Mr. Jensen?” Jensen responded: “I believe that’s a fair statement, Your Honor.” That is indeed a fair statement, and it is also why $8 million is a fundamentally unfair penalty on Winston & Strawn.
HRP’s final argument is not mentioned here because of alleged error in it; able opposing counsel made no objections to the argument and therefore waived any error. Rather, HRP’s final argument is mentioned here to highlight the buttons that were pushed to produce this $3 million punishment of a blameless defendant. The jury did exactly what it was asked by HRP to do; it punished Winston & Strawn for wrongs much greater than—and wrongs completely unrelated to—the evil-minded conduct of Arthur P. Greenfield after March 1, 1981.
D. Measure of damages: Greenfield was the wrongdoer, and it is his financial condition that should have been relevant, not Winston & Strawn’s. See Shetka v. Kueppers, Kueppers, Von Feldt and Salmen,
In Wilson v. Riley Whittle, Inc., this Court held that “the trier of fact can award a higher amount of punitive damages against the master than the amount awarded against the servant.”
E. Due Process: If the factors required by Haslip and Hawkins are properly сonsidered, I respectfully submit that the punitive damages penalty imposed on Winston & Strawn is unconstitutional, a taking without due process of law.
The trial court affirmed the award of punitive damages mainly because “based on the evidence presented concerning the financial worth of the Defendant [Winston & Strawn], the amount can not be said to be indicative of passion or prejudice.” The majority relies on the same sort of quantitative analysis, finding that: “The award is proportionate to Winston & Strawn’s financial position; it represents approximately 3.1 percent of the firm’s gross revenues for 1990.” Maj. at 135,
Haslip provides that “the fact finder must be guided by more than the defendant’s net worth”; it also provides numerous factors to consider in the due process analysis, and advises that because those factors are applied by reviewing courts in Alabama, “Alabama plaintiffs do not enjoy a windfall because they have the good fortune to have a defendant with a deep pocket.”
The punitive damages award should be reversed; failing that, the punitive damages offset should be affirmed.