Southern Union Co. v. Irvin , 415 F.3d 1001 ( 2005 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
SOUTHERN UNION COMPANY, a 
Delaware corporation,
Plaintiff-Appellee,
v.
SOUTHWEST GAS CORPORATION, a No. 03-16649
California corporation; ONEOK INC., D.C. Nos.
an Oklahoma corporation; CV-99-01294-ROS
MICHAEL MAFFIE; THOMAS
HARTLEY; GENE DUBAY; THOMAS  CV-00-00119-ROS
CV-00-00452-ROS
SHEETS; JOHN GABERINO; JACK D. CV-00-01812-ROS
ROSE; EDWARD ZUB; LARRY W. CV-00-01775-ROS
BRUMMETT,
Defendants,
and
JAMES M. IRVIN,
Defendant-Appellant.

8139
8140 SOUTHERN UNION CO. v. IRVIN
SOUTHERN UNION COMPANY, a 
Delaware corporation,
Plaintiff-Appellant,
v.
SOUTHWEST GAS CORPORATION, a No. 03-16729
California corporation; ONEOK INC., D.C. Nos.
an Oklahoma corporation; CV-99-01294-ROS
MICHAEL MAFFIE; THOMAS
HARTLEY; GENE DUBAY; THOMAS  CV-00-00119-ROS
CV-00-00452-ROS
SHEETS; JOHN GABERINO; JACK D. CV-00-01812-ROS
ROSE; EDWARD ZUB; LARRY W. CV-00-01775-ROS
BRUMMETT, OPINION
Defendants,
and
JAMES M. IRVIN,
Defendant-Appellee.

Appeal from the United States District Court
for the District of Arizona
Roslyn O. Silver, District Judge, Presiding
Argued and Submitted
May 10, 2005—San Francisco, California
Filed July 13, 2005
Before: Stephen Reinhardt, John T. Noonan, and
Ferdinand F. Fernandez, Circuit Judges.
Opinion by Judge Noonan;
Partial Concurrence and Partial Dissent by Judge Fernandez
8144 SOUTHERN UNION CO. v. IRVIN
COUNSEL
Tom Q. Ferguson, Tulsa, Oklahoma, for plaintiff-appellee-
appellant Southern Union Company.
Barry Richard, Tallahassee, Florida, Elliot H. Scherker,
Miami, Florida, for defendant-appellant-appellee James M.
Irvin.
OPINION
NOONAN, Circuit Judge:
James M. Irvin, a citizen of Arizona, appeals the judgment
of the district court in favor of Southern Union Company, a
Delaware corporation, on Southern Union’s claims of tortious
interference with a business expectancy and tortious interfer-
ence with contractual relations, as a result of which Southern
Union was ultimately awarded $390,072 in compensatory
damages and $60,000,000 in punitive damages. Southern
Union cross-appeals the district court’s decision to keep its
claim of lost profits from the jury.
We hold, first, that the appeals were timely filed; second,
that the compensatory damage award should be affirmed; and
third, that the punitive damages are constitutionally dispropor-
tionate to the harm found.
Jurisdiction. The case was brought by Southern Union
under the Racketeer Influenced and Corrupt Organizations
Act (RICO), 18 U.S.C. § 1961, and as a suit asserting diver-
sity jurisdiction under 28 U.S.C. § 1332. In the course of the
SOUTHERN UNION CO. v. IRVIN 8145
proceedings, various defendants settled with Southern Union;
the RICO claim dropped out; and only the business and con-
tract torts went to the jury. In this court, our first question is
the timeliness of Irvin’s appeal; the timeliness of Southern
Union’s cross-appeal is dependent on our finding Irvin’s
appeal timely. We state the facts relevant to this issue.
On December 18, 2002, the jury returned its verdict in
favor of Southern Union. The jury awarded damages of
$975,181 on the contract claim, with 40% liability assigned to
Irvin. The jury awarded $975,181 on the business relationship
claim with 20% liability assigned to Irvin. The jury awarded
$60 million in punitive damages. On January 9, 2003, Irvin
moved for judgment notwithstanding the verdict (JNOV) or in
the alternative for a new trial or remittitur. On January 24,
2003, the district court issued a ruling as to the proposed form
of judgment, taking into account that the jury had assigned
different percentages of responsibility to Irvin for the two
torts for which the jury held him responsible. The court ruled
that the two percentages should be averaged to determine
Irvin’s liability. On June 2, 2003, the district court denied
Irvin’s motion for JNOV. On July 28, 2003, the district court
again denied Irvin’s motion for JNOV and also his motion for
a new trial or remittitur. This order, in its entirety, read:
Pending before Court is Defendant Irvin’s
Amended Motion for JNOV or in the Alternative for
New Trial or Remittitur. The Court has reviewed the
briefing, and will deny the motion. A written opinion
will follow early next week.
Accordingly,
IT IS ORDERED that Defendant Irvin’s Amended
Motion for JNOV or in the Alternative for New Trial
or Remittitur is DENIED.
DATED this 25 day of July, 2003.
8146 SOUTHERN UNION CO. v. IRVIN
This order was communicated to counsel and docketed on
July 28, 2003.
On July 31, 2003, the district court signed a second Order
which dealt with Irvin’s two post-trial motions, analyzed them
in detail, and denied them. This order was docketed August
1, 2003.
On August 14, 2003, the district court signed what it
termed “Final Judgment.” It read, in its entirety, as follows:
These consolidated actions came on for jury trial
on October 29, 2002, the Honorable Roslyn O. Sil-
ver presiding. On December 18, 2002, all remaining
matters having been duly tried and submitted to the
jury, the jury rendered its verdict in matter CIV-99-
1294-PHX-ROS. Judgment is hereby entered in
favor of Southern Union Company and against
Defendant James M. Irvin as follows: (1) On South-
ern Union’s claim for intentional interference with
contract, the sum of $975,181.46, adjusted by rela-
tive degrees of fault to $390,072.58; (2) On Southern
Union’s claim for intentional interference with busi-
ness expectancy, the sum of $975,181.46, adjusted
by relative degrees of fault to $195,036.29; (3) The
higher amount of $390,072.58 constitutes the total
actual damages assessed against Defendant Irvin,
and in favor of Southern Union; (4) Punitive dam-
ages in the sum of $60,000,000.00; (5) Its cost of
suit as taxed by the Clerk and as approved by the
Court.
DATED this 14 day of August, 2003.
This order was docketed August 18, 2003. Irvin’s Notice of
Appeal was filed August 29, 2003, within 30 days of the entry
of this judgment.
SOUTHERN UNION CO. v. IRVIN 8147
[1] Southern Union argues that Irvin was late; the appeal
deadline was August 28, 2003, thirty days from the entry of
the judgment of July 28. Southern Union relies on Federal
Rules of Appellate Procedure (FRAP) 4(a)(4)(A), which reads
as follows:
(4) Effect of a Motion on a Notice of Appeal.
(A) If a party timely files in the district court any
of the following motions under the Federal Rules of
Civil Procedure, the time to file an appeal runs for
all parties from the entry of the order disposing of
the last such remaining motion:
...
(v) for a new trial under Rule 59 . . .
Read literally, the rule applies. The district court on July 28,
2003 entered its order disposing of Irvin’s motion for a new
trial. The appeal period expired August 28, 2003.
[2] We do not believe that the rule was intended to work
in this way. On July 28, 2003, final judgment including the
damages had not yet been entered. What would Irvin have
appealed? In Alice in Wonderland, the rule is “Sentence first
— Verdict afterwards.” We could read our rule to mean
Appeal first, Judgment afterwards. But we are not in Wonder-
land. Irvin’s appeal was timely, as was Southern Union’s,
which was filed on September 12, 2003.
Having determined that we do have jurisdiction, we turn to
the merits of the two appeals.
FACTS
James M. Irvin was elected in January, 1997 to be one of
the three commissioners of the Arizona Corporation Commis-
8148 SOUTHERN UNION CO. v. IRVIN
sion (the ACC). This body regulates energy companies in Ari-
zona and has the power to approve or disapprove mergers of
such companies. Ariz. Rev. Stat. § 38-431; Ariz. Const. art.
XV, 4-5. Irvin became chairman in November 1997 and
served in this capacity until May 1999. Jack D. Rose was a
lawyer and friend of Irvin and had worked on Irvin’s cam-
paign for election to the ACC. In June 1997, Irvin nominated
him to be Executive Secretary of the ACC. Rose served in this
capacity until December 31, 1998. Irvin and Rose became
defendants in this case because of their relationship to the
merger deliberations of Southwest Gas Company (SWG).
On December 14, 1998, SWG announced its agreement to
merge with ONEOK, Inc., an appropriate acronym for One-
Oklahoma, a leading Oklahoma natural gas company. The
price offered by ONEOK was $28.50 per share of SWG stock.
The parties agreed that a competing offer at a higher price
would entitle SWG to consider the higher offer. On February
1, 1999, Southern Union offered SWG $32 per share on terms
otherwise the same. The value of this offer was $108,000,000
over ONEOK’s. If accepted, the deal would have created the
largest natural gas utility in the United States. Any merger
had to be approved by the ACC and by the appropriate regula-
tory authorities in California, Missouri, and Nevada.
On February 21, 1999, the SWG board unanimously deter-
mined that Southern Union’s offer was a “Superior Proposal”
as defined in the merger agreement with ONEOK. That deter-
mination meant that Southern Union’s financial plan was “vi-
able”; that “the deal was doable”; and that Southern Union
could get regulatory approval. SWG was therefore free to
negotiate with Southern Union. Irvin and Rose, however,
worked to defeat Southern Union’s proposal.
On December 28, 1998, Rose, still the Executive Secretary
of the ACC, sent a business proposal to Prudential Securities,
Inc. (PSI), a New York investment house and wholly owned
subsidiary of the Prudential Insurance Company of America.
SOUTHERN UNION CO. v. IRVIN 8149
Rose wrote: “Last week Southwest Gas Corporation
announced that it is being bought out in an all cash transac-
tion. Given my relationship with this company and my ability
to advise them on important regulatory issues related to the
merger, I believe that I am well positioned to get some of the
underwriting business.” Neither Rose as a regulator nor PSI
as an underwriter seemed aware of the implications of a regu-
lator touting his ability to obtain business from a company
within his jurisdiction.
On December 31, 1998, Rose resigned as Executive Secre-
tary. On January 2, 1999, he was hired at the ACC by Irvin
as a “Loaned Executive,” without the knowledge or approval
of other ACC commissioners.
On February 12, 1999, Irvin called Larry Brummett, chair-
man of ONEOK, and told him that he didn’t want a bidding
war between ONEOK and Southern Union and that he wanted
to write SWG. A few days later, Rose, with Irvin’s approval,
traveled to Oklahoma and met Brummett. Brummett agreed
that Rose could set up a meeting between representatives of
PSI and ONEOK. February 23, 1999, the day after Southern
Union’s offer became public, Rose called PSI and told them
that he was advising the chairman of ONEOK on the pro-
posed merger and would arrange for PSI people to meet the
CEO and CFO of ONEOK. On March 2, 1999, Rose met with
John Gaberino, general counsel of ONEOK. The next day,
Gaberino and Rose met with Irvin, who told Gaberino that
Rose had given him a good report on ONEOK and that Irvin
intended to contact the other two relevant regulatory bodies,
the California Public Utilities Commission (the CPUC) and
the Public Utilities Commission of Nevada (the PUCN). Two
days later, March 5, 1999, Gaberino and another lawyer for
ONEOK worked on a letter for Irvin to send to the board of
SWG. Gaberino went over the text of this letter with Rose.
This letter (the Rose-Irvin letter) was to become an instrument
in Irvin’s interference with the proposed Southern Union
merger.
8150 SOUTHERN UNION CO. v. IRVIN
On March 9, 1999, J. David Dubin of PSI sent an email to
Joseph Sebastian Fichera, a managing director of the same
company. This communication was titled “Referral Business
Opportunity Through Jack Rose.” Referring to Rose, Dubin
stated:
3. Jack says that the Company’s CEO has a strong
motive for wanting to reward him presumably for his
work in helping the Company obtain favorable regu-
latory action from the ACC during his tenure as its
chief executive. He would like to pursue the Trans-
action on behalf of PSI and is confident that he can
persuade the Company to name PSI as a managing
underwriter.
4. Jack is concerned, however, about using up his
goodwill with the CEO to obtain an engagement in
which the fee income to IBG [= Investment Banking
Group or underwriter] will be modest in comparison
to the fees IBG would collect (and that he in turn
would share) as an advisor on an acquisition. Hence,
Jack has proposed that he and PSI enter into a find-
er’s fee arrangement under which his contingent
payout would be larger if he can deliver a more
lucrative appointment for PSI. Specifically, he would
propose the following percentage payouts of the fee
income booked by IBG on the Transactions:
A. For appointment
as a Co-Manager. 15% of IBG fee income
B. For appointment
as a Senior Manager 33% of IBG fee income
C. For appointment
as Sole Manager 40% of IBG fee income.
....
SOUTHERN UNION CO. v. IRVIN 8151
6. Time is of the essence. Jack’s telephone in
Phoenix is 602-906-9007.
On March 10, 1999, Fichera passed this information on to
another executive at PSI:
A person we met on the Administrative Securitiza-
tion trail in Arizona says he can help deliver a signif-
icant piece of business to us. The client, he told us
today, is Oneok, a major midwestern gas company
(Carol Coale does not cover them though she tracks
them). We do not have a relationship with this firm
(last WARP call date 5/95 from someone no longer
here). It is an A rated company and someone we
would like to do business with. He is willing to work
completely on the come___no deliver, no pay. But,
if he does deliver, he wants to be paid big time (see
below).
I think this is worth pursuing___it is real___ but
need your guidance as to how much to compensate
if he really can deliver a senior managed or sole
managed deal.
We need to get back to him on Thursday AM.
On March 19, 1999, Fichera, on behalf of Prudential Secur-
ities, and Rose entered into a contract providing as follows:
Dear Jack:
This letter is to confirm our mutual understanding
with respect to compensation that may be payable to
you from Prudential Securities Incorporated (“PSI”)
with respect to certain public offerings of securities
underwritten by PSI.
You agree to introduce PSI to ONEOK, Inc. and
U.S. West (each a “Company”) and to assist PSI in
8152 SOUTHERN UNION CO. v. IRVIN
securing the engagement of PSI by each Company
(collectively, the “Introduction”). If during the next
24 months either Company consummates a public
offering of its securities in which PSI acts as a man-
aging underwriter (a “PSI Underwritten Offering”),
PSI will pay to you a fee (the “Fee”) based on a per-
centage of the management fee paid to PSI with
respect to such PSI Underwritten Offering according
to the following schedule:
Capacity of PSI Percentage of Management Fee
Co-Manager 15%
Lead Manager or
Co-Lead Manager 30%
Sole Manager 35%
The Fee shall be paid to you within 30 days of the
receipt of the management fee by PSI, provided that
such Fee is not prohibited by law. PSI will only be
obligated to pay you a Fee hereunder when the entire
fee payable to PSI with respect to a PSI Underwrit-
ten Offering has been received by PSI free of
adverse claim.
PSI shall reimburse you periodically for your reason-
able, out-of-pocket travel and lodging expenses
incurred with PSI’s prior consent in connection with
the Introduction.
Although only the proposed merger of ONEOK and U.S.
West was referred to, this agreement, it could be inferred, was
also to govern an ONEOK merger with SWG. A series of
telephone calls between Rose and Irvin punctuated Rose’s
negotiations with PSI.
SOUTHERN UNION CO. v. IRVIN 8153
Rose and Irvin were at work even before Rose’s contract
was signed. In a memo dated March 16, Mark Dioguardi, a
lawyer for ONEOK, had noted: “Letter from one or more
Chair would sink [Southern Union].” On that date, Irvin and
Rose were in San Francisco. Their trip was unknown to the
ACC, and their expenses were not charged to it. In San Fran-
cisco they met with members and staff of the CPUC. Accord-
ing to Harvey Morris, who attended the meeting as counsel
for the CPUC, Irvin and Rose together conducted a lobbying
campaign for ONEOK. They presented the Rose-Irvin letter
criticizing a SWG—Southern Union merger, stated that
Southern Union would have to issue junk bonds to finance the
merger, and added that Southern Union’s debt-equity ratio
would become 80-20. The meeting began and ended with
Irvin and Rose urging the CPUC to send the Rose-Irvin letter
to SWG. Everything said about Southern Union by the two
Arizonans was negative.
On March 23, 1999, Irvin and Rose traveled to Reno,
Nevada and the following day met with Judy Sheldrew, the
chair of the PUCN. Irvin introduced Rose to talk about the
SWG merger proposals. Rose told her that ONEOK was by
far the superior candidate. Irvin urged her to have the Nevada
commission issue the Rose-Irvin letter to SWG that he had
urged upon the CPUC.
On March 25, 1999, Irvin and Rose met with Kenneth
Guinn, the governor of Nevada and a former chairman of
SWG. They urged him, too, to send a negative letter to SWG
regarding Southern Union’s offer. Governor Guinn declined
to do so but, instead, called the CEO of SWG and advised him
to “read between the lines” of the letter he would receive from
Irvin. The Rose-Irvin letter was faxed to SWG by Irvin on
April 5, 1999 from his office at the ACC. It was signed by
him alone.
April 5 was the same day the SWG board was to meet to
discuss the competing merger offers. After faxing his letter,
8154 SOUTHERN UNION CO. v. IRVIN
Irvin moved to Rose’s home and from there called the CEO
of SWG. Irvin told him that it was highly unlikely that a
SWG-Southern Union merger would be approved by the ACC
and that the California commission was equally concerned
about that proposal. This telephone call was tape-recorded
and played to the board of SWG. Copies of the Rose-Irvin let-
ter were distributed to the board. Members of the board saw
the regulators’ position as a big problem in the way of accept-
ing Southern Union’s higher offer.
On April 12, 1999, Fichera of PSI and Rose met with offi-
cials of ONEOK, who indicated their readiness to do business
with PSI. Thereafter Rose sent PSI an amendment to their
agreement of March 19, 1999. Whereas the split of “any cus-
tomary M&A advisory fee” on the ONEOK-U.S. West
merger gave only 35% to Rose, the amendment proposed the
split of the advisory fee on an ONEOK-SWG merger in this
way: “2/3rds to Rose and 1/3rd to Prudential up to $3 million
and 80% to Rose and 20% to Prudential for any fees in excess
of $3 million.” Rose’s proposal was formally accepted by PSI
in a contract signed by Fichera and dated June 22, 1999.
On April 26, 1999, SWG announced that it had rejected
Southern Union’s offer. The press release of SWG announced
that its board “believes that Southern Union would have a
more protracted and difficult time in obtaining regulatory
approvals, extending eighteen months or longer.” SWG went
ahead with ONEOK.
Rose guided ONEOK through the regulatory process and
was congratulated by ONEOK for his help. ONEOK prepared
a $300 million debt offering to finance the merger with SWG.
PSI was to be a manager of the underwriting. Rose, however,
did not collect his commission. Shortly after Southern Union
filed its complaint in this case in July 1999, ONEOK canceled
the offering. After Southern Union had conducted discovery
in this case and in the course of it gained knowledge of PSI’s
SOUTHERN UNION CO. v. IRVIN 8155
agreement with Rose on the fees he would earn, ONEOK
withdrew entirely from the merger.
PROCEEDINGS
On July 19, 1999, Southern Union filed its complaint in
this case. Its second amended complaint, filed July 25, 2000,
was the operative basis of the trial. Before trial, on December
15, 2000, the district court dismissed the RICO claims on the
ground that they constituted a securities fraud claim and were
therefore barred by the Private Securities Litigation Reform
Act of 1995, 18 U.S.C. § 1964(c).
In 2001, the multiple defendants moved for summary judg-
ment. On January 4, 2002, the district court entered a compre-
hensive order disposing of these motions. We note the
relevant rulings. (1) Granted was a motion to deny Southern
Union the right to present a jury with evidence of its lost prof-
its. (2) Denied was a motion for summary judgment by Jack
Rose. The court observed that Rose had invoked his privilege
against self-incrimination as to the matters at issue and that
his invocation of the privilege in a civil suit left the fact-
finders free to draw adverse inferences against him. (3)
Denied was a motion for summary judgment by ONEOK, the
court ruling that “ONEOK’s characterization of the evidenti-
ary record is demonstrably false.” After discovery and various
motions, on October 29, 2002, a jury of nine was selected,
sworn, and empaneled.
Prior to trial, an incident occurred that made a sharp
impression on the district court and is best presented in the
judge’s own words as she reviewed Irvin’s post-trial motion
for remittitur: Irvin participated in a “scheme to impede the
jury’s search for truth at trial.” The scheme involved his wife,
Carol, fabricating notes of a telephone call of July 31, 1999,
between herself and Jack Rose; in the conversation Rose
appeared to exculpate Irvin from any charge of wrongdoing.
Irvin gave the notes to his counsel, who presented them to the
8156 SOUTHERN UNION CO. v. IRVIN
court. When counsel for Southern Union obtained the oppor-
tunity for its forensic examiner to inspect the notes, Irvin’s
counsel admitted that the notes were not contemporaneous
with the telephone call but had just recently been written; he
withdrew his proffer of the notes. Southern Union then moved
to admit the notes as evidence of Irvin’s intentional fabrica-
tion of evidence. The court granted the motion.
After nearly two months of trial, the jury returned its ver-
dict. The subsequent proceedings and the appeals have
already been noted.
ANALYSIS
[3] Evidence supporting the verdict. Irvin continues to
argue that he is entitled to JNOV because Southern Union
failed to show that his efforts caused SWG to reject its offer.
He cites the testimony of a pair of SWG officers who had
doubts about Southern Union’s offer, but each of these wit-
nesses tied their doubts to difficulties the regulators might
raise. Some members of SWG’s board did not think Irvin’s
interventions significant. Others did. That adverse inferences
could be drawn against Rose has already been observed.
Some of the strongest evidence from which the jury could
draw inferences was the value ONEOK placed on Rose’s ser-
vices and relationship with Irvin as well as Rose’s own high
evaluation of his help after the April 5, 1999, meeting of the
SWG board. Enough evidence was presented to the jury for
it to find that Irvin caused at least 40% of the harm to South-
ern Union by interfering with its contractual relations; his
interference was a significant cause. Caudle v. Bristow Opti-
cal Co., 224 F.3d 1014, 1023-24 (9th Cir. 2000) (as amended)
(citing Wagenseller v. Scottsdale Mem’l Hosp., 710 P.2d
1025, 1041 (Ariz. 1985).
[4] Irvin’s scope of authority defense. Under Arizona law,
a statute regulates claims against public employees such as
Irvin. Ariz. Rev. Stat. § 12-821.01(A). It applies if the suit is
SOUTHERN UNION CO. v. IRVIN 8157
against the employee in his public capacity and is directed to
cases making claims against the employee’s public employer.
Id.
[5] Irvin has found a decision of an intermediate Arizona
court that he contends fits his case:
[I]t is unnecessary for the claimant to sue the
employer or file a notice of claim against either the
individual public employee or the employer. Instead,
in such a case the issue of whether the defendant was
acting within the course and scope of his employ-
ment remains to be decided by the trier of fact, and
a plaintiff who fails to file a notice of claim does so
at his own risk. The parties have not reached the
point in the proceeding at which it is appropriate to
raise and decide the question whether the acts were
done in the scope of Crum’s employment, but it is
clear that it cannot be resolved on a motion to dis-
miss. In any event, if the plaintiff does not file a
notice, and the finder of fact concludes that the
defendant was acting within the course and scope of
his employment, the plaintiff cannot have judgment
against the defendant.
Crum v. Super. Ct., 922 P.2d 316, 318 (Ariz. Ct. App. 1996).
[6] majority of this court holds that, under the rule stated
in Crum, Irvin was entitled to have the jury consider his
defense that his actions were within the scope of his duties as
a member of the ACC. Despite this holding, a different major-
ity concludes that the instructional error was harmless.
Assessing punitive damages of $60 million against him, the
jury provided “a strong indication” that it disbelieved Irvin’s
account of what he was up to. Larez v. Holcomb, 16 F.3d
1513, 1518 (9th Cir. 1994). Southern Union’s view of the
facts, accepted by the jury, was that Irvin’s acts were con-
nected with his official duties only as much as a judge accept-
8158 SOUTHERN UNION CO. v. IRVIN
ing a bribe to decide a case in favor of the briber would be
engaging in conduct connected to his duty as a judge. Large
punitives are “evidence that an erroneous jury instruction was
harmless.” See Swinton v. Potomac Corp., 270 F.3d 794, 806
(9th Cir. 2001), cert. denied, 535 U.S. 1018 (2002). In short,
the award here “makes it quite plain” that the jury would have
come to the same conclusion even if the Crum instruction had
been given. Lambert v. Ackerley, 180 F.3d 997, 1009-10 (9th
Cir. 1999) (en banc), cert. denied, 528 U.S. 1116 (2000).
[7] The punitive damages. Sixty million dollars in puni-
tives after an award of compensatory damages against Irvin of
$390,072! The ratio of over 153 to 1 immediately commands
our attention. It cannot survive the constitutional scrutiny
required by the Supreme Court. State Farm Mut. Auto. Ins.
Co. v. Campbell, 538 U.S. 408 (2003).
[8] No bright line has been set beyond which punitives may
not go. Id. at 425. But we have been reminded that, under
established principles, few awards exceeding a single digit
ratio to a significant degree “will satisfy due process.” Id.
Even an award more than four times the amount of compensa-
tory damages “might be close to the line of constitutional
impropriety.” Id. History points to double, triple, or quadruple
punitives; these ratios “are instructive.” Id. In the light of
these admonitions and suggested boundaries, we review the
jury award and the judge’s ruling sustaining it.
[9] “ ‘The most important indicium of the reasonableness
of a punitive damages award is the degree of reprehensibility
of the defendant’s conduct.’ ” Id. at 419 (quoting BMW of
North America, Inc. v. Gore, 517 U.S. 559, 575 (1996)).
Briefed on Campbell, the district court properly looked first
at this factor. The court found Irvin’s conduct to be “marked
by two factors: repeated actions and harm caused by inten-
tional trickery and deceit.” Irvin, the court stated, had abused
his powers as a commissioner “in favor of the private interests
of a specific utility company, ONEOK, and his personal inter-
SOUTHERN UNION CO. v. IRVIN 8159
ests . . . .” Harm to Southern Union was inflicted by Irvin by
his letter and his telephone call to the April 5, 1999 board
meeting of SWG and by his instigation of Governor Guinn’s
call. This actual harm was the culmination of two months of
planning and activity directed to blocking the proposed South-
ern Union merger.
Irvin’s purposeful persistence in this effort, the district
court found, was matched by his efforts at concealment. As
far as possible, his activities to block the merger were kept
from his fellow commissioners, and, the court added, “after-
wards he covered up his wrongdoing to ensure the outcome
of the scheme.”
When Southern Union challenged him and began litigation,
Irvin’s effort at concealment continued: “he persevered in hid-
ing his wrongful acts throughout the trial and in particular
while testifying in Court before the jury.” The court marked
as “particularly egregious” Irvin’s manufacture of evidence
— the fabricated notes of his wife’s telephone conversation
with Rose, which Irvin persuaded his counsel (paid for him by
the state of Arizona) to present as genuine to the court. The
court found this “intentional fabrication of evidence” by Irvin
to show his consciousness of guilt and to go to the reprehensi-
bility of his conduct.
The district court noted that neither Campbell nor Gore
considered reprehensible conduct by a public official. The
court noted that significant consideration must be given to the
nature of the public trust embodied in the public office the
official held. The court noted the broad power of the ACC,
which the Supreme Court of Arizona said was “treated as a
fourth branch of government in Arizona.” Polaris Int’l Metals
Corp. v. ACC, 652 P.2d 1023, 1029 (Ariz. 1982).
The court turned to the award of punitives in civil rights
cases under 42 U.S.C. §§ 1981 and 1983 where the ratio of
punitives to actual damages far exceeded a single digit ratio.
8160 SOUTHERN UNION CO. v. IRVIN
Indeed nominal damages had been held sufficient to support
the award of punitives against a public officer. Gill v. Manuel,
488 F.2d 799, 802 (9th Cir. 1973). In holding that municipali-
ties are exempt from punitives in civil rights cases, the
Supreme Court noted that effective deterrence was achieved
by the assessment of punitives against the offending official.
City of Newport v. Fact Concerts, Inc., 453 U.S. 247, 269-70
(1981). The district court held that the single digit ratio was
not the right measure from harm by a public official abusing
his trust.
[10] The district court was right in seeing reprehensible
conduct by a public official as presenting an issue not
addressed by Gore and Campbell. It was, however, we
believe, mistaken in using awards in civil rights causes as a
bench mark. The redress of racial, religious or gender dis-
crimination has been treated as a special area of public con-
cern where affront to human rights may require high
punitives. Zhang v. American Gem Seafoods, Inc., 339 F.3d
1020, 1043 (9th Cir. 2003), cert. denied, 541 U.S. 902 (2004).
We do not believe that the civil rights case ratios apply to a
case brought as a private tort action.
[11] We do not mean to minimize the magnitude of Irvin’s
exploitation of his office. The jury was entitled to consider
how he worked hand in glove with Rose and what this coop-
eration meant in securing for Rose 66-2/3% of the underwrit-
ing management fee up to $3 million and 80% of the fee
beyond $3 million. That no payoff could be shown was
because the grateful underwriter withdrew as this litigation
went on. Nothing in Irvin’s extraordinary efforts suggests that
he was motivated only by a selfless desire to enrich Rose.
[12] The failed plan to introduce fabricated evidence also
did not bring a profit to Irvin, nor, since it failed, did it do any
economic harm. Nonetheless, this shady strategy could appro-
priately enter the jury’s calculation. See United States v. Per-
kins, 937 F.2d 1397, 1401-2 (9th Cir. 1991). In addition, Irvin
SOUTHERN UNION CO. v. IRVIN 8161
was observed at his ACC office destroying documents sub-
poenaed by the plaintiff, and his secretary had her hard drive
reformatted. In court, Irvin repeatedly denied evidence of his
misconduct, to the extent that the district court found his testi-
mony to be part of his reprehensible conduct. As his docu-
ment destruction was incomplete and as his words under oath
did not convince the jury, no economic harm was done by
them. They were grave injuries to the judicial process.
[13] To sum up our view of the punitives, the ratio to actual
damages is too high. The noneconomic damage to the judicial
process and the exploitation of high public office were prop-
erly taken into account. We vacate the award, remanding for
the district court to offer the option of a remittitur or a new
trial on the punitives. We leave to the discretion of the district
court the ratio to be set if it orders remittitur.
[14] Southern Union’s appeal. The district court found that
Southern Union offered “insufficient evidence to establish the
terms of a consummated merger with Southwest.” Although
Southern Union points to evidence to the contrary, we are
unwilling to reverse the well-informed trial judge on this
close question, especially as a new trial on the alleged lost
profits would, at most, lead to the award of damages not
likely to be collected.
[15] Conclusion. The award of punitive damages is
vacated and this issue is remanded to the district court with
instruction to order a remittitur or a new trial on this issue.
The judgment against Irvin for compensatory damages is
affirmed. Southern Union’s cross-appeal is denied.
03-16649—Affirmed in part, vacated in part, and
remanded.
03-16729—Affirmed.
8162 SOUTHERN UNION CO. v. IRVIN
FERNANDEZ, Circuit Judge, Concurring and Dissenting:
I dissent in part because I believe that a new trial is
required, although, as I will note, I also concur in part because
I do agree with certain portions of the majority opinion.
A. Jurisdiction
I do agree with the majority’s pithy opinion that we have
jurisdiction over this appeal and that a contrary rule would
approach parody. Still and all, at the risk of being unduly pro-
lix, I will say a few more words about my reasons for agree-
ing on this issue.
The problem we are faced with is the plain language of
Fed. R. App. P. 4. While it is usually thought that a party’s
time to file a notice to appeal does not start to run until a judg-
ment is filed, the rule itself does not say so on its face. Its
plain language states that the time starts to run upon the entry
of the judgment appealed from except as provided in Rule
4(a)(4). See Rule 4(a)(1)(A). But Rule 4(a)(4)(A) says that the
time runs from the date that certain posttrial motions are
decided (entry of an order disposing of them). The plain lan-
guage suggests that even if no judgment has been entered, the
time starts to run when the motions are decided. Like the
majority, I do not think that reading can be accepted. Why?
Pursuant to 28 U.S.C. § 1291, our jurisdiction extends to
final decisions only. Thus, until there is a final decision, we
cannot take jurisdiction over a case. But a party cannot have
a final decision to appeal from until one is entered. (True, a
party might file a notice of appeal earlier, but it is not effec-
tive. It is simply saved under Rule 4(a)(2)). Thus, the plain
reading would lead to the possibility that pursuant to Rule
4(a)(4)(A) the time to file a notice to appeal would run out
before there was a final judgment over which we could take
jurisdiction.1 That seems peculiar, not to mention unjust. See
1
In general, a judgment is the equivalent of a final decision. See Bankers
Trust Co. v. Mallis, 435 U.S. 381, 384 n.4, 98 S. Ct. 1117, 1119 n.4, 55
L. Ed. 2d 357 (1978).
SOUTHERN UNION CO. v. IRVIN 8163
Clinton v. City of N.Y., 524 U.S. 417, 428-29, 118 S. Ct. 2091,
2098, 141 L. Ed. 2d 393 (1998); Pub. Citizen v. United States
Dep’t of Justice, 491 U.S. 440, 452-55, 109 S. Ct. 2558,
2566-67, 105 L. Ed. 2d 377 (1989); Green v. Bock Laundry
Mach. Co., 490 U.S. 504, 527-28, 109 S. Ct. 1981, 1994-95,
104 L. Ed. 2d 557 (1989) (Scalia, J., concurring); Or. Natural
Res. Council, Inc. v. Kantor, 99 F.3d 334, 339 (9th Cir. 1996).
Similarly, if Southern Union were correct, the time for a
notice to appeal would begin to run before there was a final
judgment (final decision) from which an appeal to us could
actually be taken. Thus, we cannot rely on the plain language
alone.
If we resort to common sense, that tells us that the idea of
being forced to appeal a judgment before there is a judgment
to appeal is rather incoherent. That would suggest that the
possibility was never considered and that Rule 4(a)(4) was
designed to extend, not limit, the appeal time set forth in Rule
4(a)(1). Not surprisingly, if we resort to the Advisory Com-
mittee notes, we can divine that they speak to the idea of post-
poning the notice of appeal while the motions in question are
pending and mandate that one should await the decision of
those. See Rule 4, Advisory Comm. Notes (1979 Amendment,
Subdivision (a)(4)). They also look upon Rule 4(a)(4)(A) as
tolling the running of or extending the time to appeal. See id.
(1993 Amendment, Note to Paragraphs (a)(1), (a)(4)).
It must be acknowledged on the other hand that Rule 4(b),
which deals with criminal appeals, explicitly addresses the
possibility that a judgment might be filed after certain
motions are disposed of and then proceeds to declare that the
time runs from the entry of the decision on the motions or
entry of the judgment, whichever is later. Rule 4(b)(3). That
suggests that the Rules Committee knew how to deal with the
problem we face here, if it thought about it and wanted to do
so. But, again, the Committee Notes regarding that provision
indicate a concern that because of the unique structure of the
criminal rules, the motions might actually be decided before
8164 SOUTHERN UNION CO. v. IRVIN
a judgment was entered. The Committee wanted to avoid the
absurdity of having the notice to appeal time run before entry
of the judgment. See Rule 4, Advisory Comm. Notes (1993
Amendment, Note to Subdivision (b)). That rather under-
scores the fact that the issue was never even contemplated for
a civil case like ours. In fact, the Committee stated that the
problem in the criminal area was that, unlike a civil case, the
time to make a motion could start running before there was
an entry of judgment. Id. The rule responded to the mention
of that difficulty in an earlier case. See United States v.
Hashagen, 816 F.2d 899, 902 n.5 (3d Cir. 1987). Unfortu-
nately, nobody had noted the problem for civil cases; nobody
even contemplated it.
All of the above being so, I agree with the majority on the
jurisdiction issue.
B. Merits
I also agree with the majority that there was sufficient evi-
dence from which a jury could hold in favor of Southern
Union. Much of that is detailed in the majority opinion.
Where we part company is on the question of whether the ver-
dict can be upheld in light of the district court’s failure and
refusal to give the scope of employment instruction requested
by Irvin.
In my view, Southern Union’s failure to give the notice
required under Arizona Revised Statutes § 12-821.01(A)
would be fatal to its case, if Irvin was, indeed, acting within
the scope of his employment. Crum v. Superior Court, 922
P.2d 316 (Ariz. Ct. App. 1996), makes that clear. As Crum
puts it: “In any event, if the plaintiff does not file a notice, and
the finder of fact concludes that the defendant was acting
within the course and scope of his employment, the plaintiff
cannot have judgment against the defendant.” Id. at 318.
If a plaintiff for some reason decides not to protect itself by
filing an appropriate notice, that is fine, but the plaintiff then
SOUTHERN UNION CO. v. IRVIN 8165
proceeds at its own peril if, as it turns out, the state officer or
employee in question was acting within the scope of his
employment. In that instance, the plaintiff’s gamble is indeed
parlous because it is not even necessary that the employee
have acted from motives which are entirely and purely public
service oriented, as long as at least a part of the employee’s
purpose was to serve his master’s needs and ends. See Smith
v. Am. Express Travel Related Servs. Co., Inc., 876 P.2d
1166, 1170-71 (Ariz. Ct. App. 1994).
That said, Irvin was surely entitled to have a jury consider
whether his actions were within the scope of his employment;
if they were, due to Southern Union’s failure to give the
required statutory notice, a judgment could not have been ren-
dered against him. Thus, the district court did err, but was the
error prejudicial? See Jenkins v. Union Pac. R.R. Co., 22 F.3d
206, 210 (9th Cir. 1994). I think it was. In my view, we can-
not say that it is more probable than not that the error was
harmless. Id.
No doubt there was evidence from which the jury could
decide that Irvin was entirely outside the scope of his employ-
ment, but there was contrary evidence also. Irvin held an
important elected position as a commissioner of the Arizona
Corporations Commission, which regulates energy companies
in Arizona, among other things.
The Commission and its members are vested with very
broad authority in their quest to benefit the public weal. In
fact, the scope of the Commission’s power and authority is so
extensive that it has sometimes been dubbed the fourth branch
of the government of Arizona. See Ariz. Corp. Comm’n v.
Superior Court, 459 P.2d 489, 493 (Ariz. 1969). As to public
service corporations, those powers include the setting of rates,
the issuing of rules and regulations, the inspection of books
and records, the receipt of reports, the conduct of investiga-
tions, and even the imposition of fines. See Ariz. Const. art.
XV, §§ 3, 4, 13, 19; see also Ariz. Rev. Stat. § 40-202; Ariz.
8166 SOUTHERN UNION CO. v. IRVIN
Corp. Comm’n v. State ex rel. Woods, 830 P.2d 807, 811-15
(Ariz. 1992) (detailing the provenance and history of the
Commission and its power). And there can be no doubt that
investigative authority, including the taking of evidence under
oath, is conferred upon “each commissioner.” Ariz. Rev. Stat.
§ 40-241.
In this case, the jury had evidence before it from which it
could have determined that Irvin’s actions, though misguided,
were designed to further the interests of the Commission and
of the State. He testified that, as he saw it, the Constitution
gave him investigative powers, as it surely did. He also stated
that he saw no reason why he should not share his concerns
with others. His position was not simply to act as a judge; he
was an investigator, an elected public official in high office,
and a person who could be expected to be much more active
than judges are. Furthermore, it is apparent that Irvin, rightly
or wrongly, saw Southern Union as a rather undesirable com-
pany which, due to its capital structure and history, would no
doubt try to save money by terminating many current employ-
ees of Southwest Gas and by degrading customer service. He
was of the opinion that the company had done something like
that in another state. Moreover, there was evidence that others
had the same view.
In addition, in Irvin’s opinion, and there is nothing to the
contrary, it was proper for an Arizona commissioner to speak
to his counterparts (and others) in other affected states and to
try to develop what he thought of as a regional approach to
regulatory problems. It is not surprising that he advocated his
view of the matter when he did so. Finally, while one can be
cynical about Irvin’s motivations,2 he expressly testified that
he was never promised anything of value for his activities.
There is absolutely no evidence that he was.
2
Can anybody trust a person who attempts to conceal, manufacture, and
manipulate evidence after a lawsuit starts?
SOUTHERN UNION CO. v. IRVIN 8167
Let me be clear. I do not intend this opinion to be an elo-
gium; I do not say that Irvin’s behavior deserves encomiums,
but, whatever his failings, the evidence does not require the
conclusion that he is a rapscallion. It should not come as a
surprise to discover that a government official thought he was
fulfilling the demands (or purposes) of his office when he
behaved in a distasteful manner. If Irvin thought he was ful-
filling the purposes of his position and acted for that reason,
he surely would not be the first governmental official, even in
recent times, who thought he was acting to benefit the public
but did so in ways that were unacceptable, improper, and even
frightening. I will leave examples of the always renascent
challenges to good government in a truly free society to the
memory, knowledge and intelligence of the reader.
In fine, under Arizona law at least, the evidence does not
necessarily, or even particularly, show that Irvin was outside
the scope of his employment when he took the actions in
question here. More specifically, a jury could find that he was
very misguided, but was still acting to further the interests and
purposes of his employer.3 The failure to give the jury an
opportunity to so decide was prejudicial error.
Did Irvin behave as he should? Of course not; the jury has
told us that. Was Irvin’s conduct bad enough to deserve pun-
ishment? Of course; the jury has told us that also. But was
Irvin actually flagitious? We do not know; the jury was not
asked to decide that question. I would reverse and remand for
a new trial.4
3
In fact, under 42 U.S.C. § 1983, we often encounter a public officer
who is acting within the scope of his employment and who has violated
another person’s sacred constitutional rights knowingly or by plain incom-
petence. See Anderson v. Creighton, 483 U.S. 635, 638, 107 S. Ct. 3034,
3038, 97 L. Ed. 2d 523 (1987); see also Saucier v. Katz, 533 U.S. 194,
201-02, 121 S. Ct. 2151, 2156, 150 L. Ed. 2d 272 (2001).
4
I agree with the majority’s conclusion that the punitive damage award
cannot stand, although, again, if Irvin was acting within the scope of his
employment, no award whatsoever would be justified.
8168 SOUTHERN UNION CO. v. IRVIN
Thus, I respectfully concur in part and dissent in part.