Dawe Closing Brief on Appeal

7/31/2019 Dawe Closing Brief on Appeal

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Case Nos. 11-16284 and 11-16416_____________________________

IN THE

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

______________________________

BRIAN DAWE and FLAT IRON MOUNTAIN ASSOCIATES, LLC, FKA Flat IronMountain Associates, a Partnership, et al.;

Plaintiffs and Appellees/Cross-Appellants,

vs.

CORRECTIONS USA, a California Corporation, et al.,

Defendants and Appellants/Cross-Appellees.______________________________

Appeal from the United States District Courtfor the Eastern District of California

Hon. Lawrence K. Karlton

District Court Case No. 2:07-CV-01790 LKK EFB (Consol. Master Case No.)______________________________

Fourth Cross-Appeal Brief: Cross-Appeal Reply Brief of Appellees/Cross-

Appellants Brian Dawe, Flat Iron Mountain Associates, LLC, and Gary

Harkins______________________________

Daniel L. Baxter (SBN 203862)Stacy M. Hunter (SBN 272712)

WILKE, FLEURY, HOFFELT, GOULD & BIRNEY, LLP400 Capitol Mall, Twenty-Second Floor

Sacramento, CA 95814Telephone: (916) 441-2420; Facsimile (916) 442-6664

Attorneys forAppellees/Cross-AppellantsBrian Dawe, Flat Iron Mountain Associates, LLC, and Gary Harkins


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TABLE OF CONTENTS

Page

I. INTRODUCTION ......................................................................................... 1II. GARY HARKINS PUNITIVE DAMAGE AWARD AGAINST

CUSA SHOULD BE RESTORED ............................................................... 2A. Harkins Claim Was Not Extremely Weak, Nor Was

Liability Questionable. .................................................................... 2

B.

Planned ParenthoodSupports Restoring the Jurys PunitiveDamage Award to Harkins. ................................................................. 5III. THE JURY WAS NOT REQUIRED TO APPLY A 1:1 RATIO TO

PLAINTIFFS PUNITIVE DAMAGE AWARDS AGAINSTCCPOA .......................................................................................................... 7

IV. APPLICATION OF STATE FARMS REPREHENSIBILITYFACTORS WARRANT A HIGHER DAMAGE AWARD RATIO .......... 12A. The Health or Safety Subfactor Favors Plaintiffs. ......................... 12B. The Financial Vulnerability Subfactor Favors Plaintiffs............... 15C. The Pattern and Practice Subfactor Favors Plaintiffs. ................... 17D. The Malice, Trickery, and Deceit Subfactor Favors

Plaintiffs. ........................................................................................... 19V. THE PERMISSIBILITY OF THE JURYS PUNITIVE DAMAGE

AWARD AGAINST CCPOA IS NOT DETERMINED BY

CCPOAS NET WORTH ........................................................................ 21A. Net Worth is Not the Overarching Analytical Touchstone,

and a Jurys Award May Permissibly Exceed Ten Percent ofNet Worth. ..................................................................................... 21


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B. CCPOAs Stated Net Worth Is Not Legitimately Indicativeof Its Financial Condition. ................................................................. 23

VI. CONCLUSION ............................................................................................ 28CERTIFICATE OF COMPLIANCE ..................................................................... 29


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Michelson v. Hamada,29 Cal.App.4th 1566 (1994) ........................................................................ 22

Orange Blossom Ltd. Pship v. S. Cal. Sunbelt Developers, Inc.,608 F.3d 456 (9th Cir. 2010) ......................................................... 8, 9, 10, 11

Park v. Mobil Oil Guam,2004 WL 2595897, at *13 (2004) .............................................................. 17

Planned Parenthood v. American Coalition of Life Activists,422 F.3d 949 (9th Cir. 2005) ............................................................... passim

Roby v. McKesson Corporation,47 Cal.4th 686 (2009) ............................................................................ 13, 14

Rufo v. Simpson,

86 Cal.App.4th

573 (2001) .......................................................................... 22

Simon v. San Pablo U.S. Holding Co., Inc.,35 Cal.4th 1159 (2005) ............................................................................... 17

State Farm Mutual Auto Ins. Co. v. Campbell,538 U.S. 408 (2003)............................................................................. passim

Swinton v. Potomac Corp.,270 F.3d 794 (9th Cir. 2001) ....................................................................... 10

United States EEOC v. W&O Inc.,213 F.3d 600 (11th Cir. 2000) ..................................................................... 11

Walker v. Farmers Ins. Exchange,153 Cal.App.4th 965 (2007) .................................................................. 17, 18

Zaxis Wireless Communications, Inc. v. Motor Sound Corp.,89 Cal.App.4th 577 (2001) .................................................................... 21, 22

TREATISESLevy, Golden and Sacks, California Torts,

45.10[3], at p. 45-50.1 (Matthew Bender 2009) ...................................... 20Weil, Wagner & Frank, Litigation Services Handbook: The Role of the

Accountant as Expert (2nd ed.),36.5, at pp. 36-9 36-10) ......................................................................... 23


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I. INTRODUCTIONDismissing the gravity of their misconduct in this case as the product of a

garden-variety business dispute (Third Brief on Cross Appeal [Third Brief or

TB] 61), Defendants maintain that the district court properly remitted the punitive

damage awards on both Gary Harkins false imprisonment claim against CUSA and

Plaintiffs assorted claims against CCPOA. (Id. at 44-64.) Specifically, Defendants

argue that:

1. Gary Harkins false imprisonment claim against CUSA was extremely

weak, with questionable liability.

2. The decision in Planned Parenthood v. American Coalition of Life

Activists, 422 F.3d 949 (9th Cir. 2005) requires courts to review the

reasonableness of punitive damage awards on a claim-by-claim basis;

2. A 1:1 ratio of punitive to compensatory damages is the maximum

award available for Plaintiffs claims against CCPOA;

3. The reprehensibility factors set forth in State Farm Mutual Auto Ins.

Co. v. Campbell, 538 U.S. 408 (2003) support remittitur of the punitive

damages against CCPOA; and

4. The remitted punitive damages against CCPOA should stand because

the jurys original award greatly exceeded CCPOAs net worth.


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Defendants arguments should be rejected, and the jurys original punitive

damage awards should be reinstated.

II. GARY HARKINS PUNITIVE DAMAGE AWARD AGAINST CUSASHOULD BE RESTORED

Defendants arguments in support of the district courts remittitur of Gary

Harkins punitive damage award against CUSA are based on (a) a startlingly partisan

characterization of the facts undergirding Harkins false imprisonment claim, and (b)

confusion over the import of the holding in the aforementioned Planned Parenthood

case. Consequently, Harkins award should be restored.

A. Harkins Claim Was Not Extremely Weak, Nor Was LiabilityQuestionable.

As was the case with their Opening Brief, Defendants Third Brief glosses

over of the severity of Defendants misconduct. This time, Defendants describe

Harkins false imprisonment claim as being premised on the following facts:

In essence, CUSA believed that Harkins had possession ofa CUSA laptop that he refused to relinquish to CUSAafter his termination. Accordingly, two CUSArepresentatives stopped Mr. Harkins in a hotel lobby andasked to look in his luggage for the laptop. Mr. Harkins

let them, they did not find the laptop, and Mr. Harkins leftthe hotel.

(TB 46.) Based on this recitation, Defendants conclude that Harkins claim was

extremely weak, with questionable liability. (Id. at 48-49.)


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The true facts are different. When Harkins attempted to leave the lobby of the

Silver Legacy hotel in Reno, Nevada on September 7, 2006 after a CUSA board

meeting, two CUSA Sergeants-at-Arms approached him, stepped toe-to-toe with

him, and demanded to look for Mr. Harkins computer. (2 AER 337.)1 The following

then ensued:

I said, What? I said, I told Robert Dean I did not haveit, because earlier in the meeting Robert Dean wanted my

computer. I said I didnt have it with me.

At that pointthese guys are a whole lot bigger than I am.I saw what they did to Brian and Richard. I thought, can Ileave this area? I kind of backed up a little bit. Theycame up closer and got toe-to-toe with me again.

Behind me there was some people standing behind mewhich were blocking the door. Basically I had nowhere togo. If I wanted to leave, I suppose I could have ran and

left my luggage, but I wasnt going to do that. So theywent through my luggage looking for my computer. Theydid not find it.

I walked out to the taxi stand. Two of the people whowere standing behind me came up to me and said, Whatwas that about?

I said, Thats what happens when you piss off MikeJimenez.

They said, Yeah. We understand that.

1Those same Sergeants-at-Arms had thrown Brian Dawe and Richard Loud out ofthe CUSA board meeting shortly before accosting Mr. Harkins. (Ibid; see, also, 2AER 270.)


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(Ibid.)

In response to later questioning, Mr. Harkins reiterated that the Sergeants-at-

Arms were standing very, very close in front of him, and that the only way he

would have been able to disengage from them was to r[u]n through the hotel lobby

by f[i]ght[ing] through the people standing behind [him] because they were

standing in the doorway. (Additional Supplemental Excerpts of Record [ASER]

14-15.)

Elsewhere in his testimony, Harkins described the intimidation he felt during

the episode:

Basically, its intimidation. Thats what were running upagainst.

Q. Let me ask you this, you described the event. Wereyou intimidated when this happened?

A. Yes. These guys are a lot bigger than I am. SandyCadeemus (sic, should be Sandy Cadeem is), hes reallyinto weight lifting. Hes very muscular. Scott Hoover isalso very big. I saw how they were manhandling Brianout of the room. I know I wasnt going to be a match forthem.

(2 AER 338-339.)

Harkins later reiterated that intimidation in response to defense counsels

questioning:


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Q. Mr. Harkins, how did Mr. Hasans appearancethreaten you?

A. His physical size. The close proximity. He waswithin what they call your space. He was really crowdingme. The same thing with Mr. Hoover. Just the physicalintimidation that was there.

(ASER 16.)2

The above facts, which were undisputed at trial (Defendants called neither of

the Sergeants-at-Arms nor any other witnesses to rebut Harkins testimony), stand in

contrast to Defendants above-mentioned indication that the interchange was some

sort of consensual, unremarkable event, or one for which liability was

questionable. And, the jurys verdict shows that Defendants efforts to write

revisionist history have already been rejected.

B. Planned Parenthood Supports Restoring the Jurys PunitiveDamage Award to Harkins.

In their Second Cross-Appeal Brief (Second Brief or SB), Plaintiffs

detailed how this Courts decision in Planned Parenthood supports restoration of the

jurys punitive damage award on Harkins false imprisonment claim because

Harkins damage awards should have been compared on a defendant-by-defendant

2 The surrounding testimony makes clear that the references in the excerpts to Mr.Hasan and Mr. Cadeem are to the same personthere appeared to be confusionby defense counsel and/or Harkins as to Sandys last name. (See, e.g., AER 337;ASER 11-13.)


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basis, rather than a claim-by-claim basis. (SB 67-70.) Under a defendant-by-

defendant assessment, the ratio between Harkins punitive and compensatory awards

against CUSA stood at .97:1 prior to remittitur (SB 65, 70; 1 ER 6), which was well

within the proportional tolerances set forth in cases like State Farm. 538 U.S. at 435.

In response, Defendants contend that because Planned Parenthood rejected both

sides arguments to aggregate the awards in different ways, the decision supports an

evaluation of punitive damage ratios on a claim-by-claim basis. (TB 48.)

Defendants contention is incorrect, and is belied by a review of the arguments

that were actually rejected by this Court. In that regard, the defendants in Planned

Parenthood argued that the total compensatory damages recoverable by each plaintiff

should be compared with the total punitive damages awarded to that plaintiff for the

same alleged course of conduct by all defendants, while the plaintiffs argued that the

punitive damage ratio should be calculated by comparing the total joint and several

liability of each defendant for compensatory damages with that defendants liability

for punitive damages. 42 F.3d at 960-61. The Court rejected the defendants

argument because it failed to allow for the possibility that the reprehensibility of

individual defendants can differ, then rejected the plaintiffs argument because it did

not differentiate between the harm inflicted upon a particular plaintiff by a particular

defendant. Ibid. Ultimately, the Court adopted a third approach, holding that in a


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multi-plaintiff, multi-defendant action, an approach that compares each plaintiffs

individual compensatory damages with the punitive damages awards against each

defendant more accurately reflects the true relationship between the harm for which

a particular defendant is responsible, and the punitive damages assessed against that

defendant. Id. at 961. The Court also noted that it makes sense to compare each

plaintiffs individual compensatory damages and punitive damages awards as to each

defendant because this approach simplifies the task of assessing constitutional

reasonableness. Id. at 962.

The Courts holding is clear. Contrary to Defendants assertion that the Court

compared the awards on a defendant-by-defendant basis because there was only one

punitive damage claim against each defendant (TB 47), it actually did so because

by the Courts own indicationsuch an approach more accurately reflects each

defendants responsibility for the harm inflicted on each plaintiff. Here, because a

defendant-by-defendant calculation of Harkins damages reveals a punitive-to-

compensatory ratio of .97:1, the pre-remitted punitive damages against CUSA

(totaling $10,000) should be restored.

III. THE JURY WAS NOT REQUIRED TO APPLY A 1:1 RATIO TOPLAINTIFFS PUNITIVE DAMAGE AWARDS AGAINST CCPOA

As discussed in Plaintiffs Second Brief (SB 68, 70-71), State Farm

contemplates a soft ceiling for punitive damages, consisting of a single-digit ratio


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between punitive and compensatory awards. 538 U.S. at 435. However, where a

defendants conduct is particularly reprehensible, or the compensatory damages are

particularly difficult to detect or measure, a larger proportion of punitive damages

may be awarded. (SB 71, and authorities cited therein.) Despite these principles,

Defendants argue that no more than a 1:1 ratio could be utilized for Plaintiffs claims

herein. (TB 49-53.) For four reasons, Defendants are mistaken.

First, Defendants assert that because Flat Iron Mountain Associates was

awarded $1 on its claims for intentional interference with prospective economic

relations, it must have failed to prove any actual damage, and the jurys punitive

damage award was per se excessive. (TB 50-51.) Defendants are incorrect. As a

foundational matter, the fact that a jury awards only nominal damages in the

compensatory class does not necessarily imply a finding that no more actual damage

was sustained. Finney v. Lockhart, 35 Cal.2d 161, 164 (1950). Consistent with that

principle, it is well established that a punitive damage award may permissibly

accompany an award of nominal compensatory damages. In fact, punitive damages

may be awarded in appropriate cases even if the injured party is not awarded any

compensatory damages. Orange Blossom Ltd. Pship v. S. Cal. Sunbelt Developers,

Inc., 608 F.3d 456, 465-466 (9th Cir. 2010) (no compensatory award, $130,000 in

punitive damages); see, also, authorities cited at SB 72; Gagnon v. Continental


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Casualty Co., 211 Cal.App.3d 1598, 1604-05 (1989); Carr v. Progressive Casualty

Ins. Co., 152 Cal.App.3d 881, 892 (1984).

Second, and relatedly, the fact that the jury awarded Plaintiffs nominal

damages actually supports the contrary of Defendants arguments relative to

appropriate punitive damage ratios in this caseto wit, that neither a 1:1 ratio nor

a single-digit ratio must apply. [W]hen a jury only awards nominal damages or a

small amount of compensatory damages, a punitive damages award may exceed the

normal single digit ratio because a smaller amount would utterly fail to serve the

traditional purposes underlying an award of punitive damages, which are to punish

and deter. Hamlin v. Hampton Lumber Mills, Inc., 246 P.3d 1121, 1127 (Ore. Sup.

Ct. 2011). This principle has been applied in cases throughout the country. In

addition to the decisions cited in Plaintiffs Second Brief (SB 72), there are many

other examples of courtsincluding this Courtdetermining that when nominal (or

no) damages are awarded, adhering to a single digit ratio would frustrate the purpose

of punitive damages. See, e.g., Orange Blossom, 608 F.3d at 465-466; Abner v.

Kan. City S. R.R., 513 F.3d 154, 165 (5th Cir. 2008) ($1 in compensatory damages,

$125,000 in punitive damages); Kemp v. Am. Tel. & Tel. Co., 393 F.3d 1354, 1364-

65 (11th Cir. 2004) (allowing punitive damages award of $250,000 accompanying

compensatory damages of $115.05 and holding that a single-digit multiplier ratio


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would utterly fail to punish and deter). As this Court stated in Orange Blossom,

[t]he due process inquiry compares the punitive damages awarded to the harm

caused by the wrongful act, not merely to the actual damages awarded. 608 F.3d at

466 (emphasis in original); see, also, Lee v. Edwards, 101 F.3d 805, 811 (2nd Cir.

1996) (rejecting ratio analysis because the compensatory award here was nominal,

[so] any appreciable exemplary award would produce a ratio that would appear

excessive by this measure).

Third, even when the compensatory award is more than nominal, the jury is

not confined to a single-digit or 1:1 calculation. As stated by the Seventh Circuit

with respect to punitive damage awards in general, the Supreme Court did not . . .

lay down a 4-to-1 or single digit ratio ruleit said merely that there is a

presumption against an award that has a 145-to-1 ratioand that it would be

unreasonable to do so. Mathias v. Accor Econ. Lodging, Inc., 347 F.3d 672, 676 (7th

Cir. 2003), citing State Farm. This is further evidence that the single-digit

construct (which Defendants continue to bootstrap into a 1:1 rule hereTB 49-51)

is not held nearly so dear as Defendants urge. And, once again, numerous cases bear

this out. Swinton v. Potomac Corp., 270 F.3d 794, 817-820 (9th Cir. 2001) ($35,600

in compensatory damages, $1,000,000 in punitive damages); Mathias, 347 F.3d at

674-78 ($5,000 in compensatory damages, $186,000 in punitive damages); United


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States EEOC v. W&O Inc., 213 F.3d 600, 616 (11th

Cir. 2000) (multiple awards,

including one award of $3,800.24 in back pay and $100,000 in punitive damages,

and another of $6,255.46 in back pay and $100,000 in punitive damages); Deters v.

Equifax Credit Info. Servs., 202 F.3d 1262, 1273 (10th Cir. 2000) ($5,000 in

compensatory damages, $295,000 in punitive damages).3

Finally, Defendants also err in suggesting that the above principles somehow

have no application to a business tort, and instead are reserved for civil rights

cases. (TB 53.) For example, the punitive damages in Mathias accompanied a

finding of gross negligence by a hotel chain in relation to a bedbug infestation in one

of its hotels (347 F.3d at 672), Orange Blossom involved an award against

petitioning creditors in a bankruptcy case who filed their petition in bad faith (608

F.3d at 461), and the award in Kemp flowed from a finding of fraudulent billing and

collection practices by a telephone company. 393 F.3d at 1357.

Given the above, the jury was not restricted to applying either a 1:1 or

single-digit ratio to Plaintiffs punitive damages against CCPOA, and Defendants

3Nearly all of the cases cited in the above three paragraphs postdate the SupremeCourts decision in BMW of North America v. Gore, 517 U.S. 559 (1996), and manyof them also postdate State Farm, thus (a) blunting Defendants complaint that threeof the cases cited in Plaintiffs Second Brief predate those decisions, and (b) belyingthe n that those decisions somehow changed the relevant playing field. (TB 52.)


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arguments to the contrary do not withstand scrutiny.

IV. APPLICATION OF STATE FARMS REPREHENSIBILITY FACTORSWARRANT A HIGHER DAMAGE AWARD RATIOIn their Second Brief, Plaintiffs discussed the reprehensibility factors

identified in State Farm for determining an appropriate measure of punitive damages.

(SB 72-76; State Farm, 538 U.S. at 419.) In response, Defendants claim that at

most, only one of the reprehensibility factors applies. (TB 54.)

Once again, Defendants are incorrect. Even putting aside the fact that the

State Farm subfactors are not an exclusive roster of the circumstances the jury may

consider (SB 75-76), Defendants analysis of the subfactors themselves falls flat.

A. The Health or Safety Subfactor Favors Plaintiffs.In addressing the health or safety subfactor, Defendants raze a straw man,

asserting that the fact that Defendants actions may have caused Plaintiffs to feel

anger, sadness or other negative emotions does not satisfy [the health or safety]

subfactor. If it did, the factor would be meaningless. (TB 55) After string citing

several cases, Defendants conclude: Plaintiffs cite nothing to the contrary. In fact,

Plaintiffs cite nothing at all on this point. (Id. at 54-55.)

Plaintiffs cited nothing at all because Defendants statement is not an

accurate formulation of Plaintiffs position. In fact, it has never been Plaintiffs

contention that the actual harm suffered by a plaintiff (whether minor or severe) may


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be used by itself to fulfill the health or safety subfactor. Plaintiffs made that point

clear in its Second Brief, as well as in the proceedings below. (SB 73 [Additionally,

even if that harm had not occurred, the health or safety factor goes not to the actual

harm caused, but to the nature and character of the conduct itself, and whether that

conduct was done with disregard toward the plaintiffs health or safety]; 5 ER

1074.) It is unclear why Defendants continue to misconstrue Plaintiffs position.

In any event, relevant case law establishes that the health or safety subfactor

encompasses conduct that could be reasonably expected to disturb ones emotional

state. In Roby v. McKesson Corporation, 47 Cal.4th 686 (2009), the plaintiff

employee was subjected to rude and belittling comments by her supervisor, and was

ultimately terminated for having a panic disorder. In discussing the health or

safety subfactor, the Court wrote as follows:

With respect to the second reprehensibility factor, it wasobjectively reasonable to assume that employerMcKessons acts of discrimination and harassment towardRoby would affect her emotional well-being, andtherefore McKessons conduct evinced an indifference toor a reckless disregard of the health or safety of others.

Id. at 713, citing State Farm.

Similarly, in Century Surety Co. v. Polisso, 139 Cal.App.4th 922 (2006), an

insurance company was found to have acted with reckless indifference to [the

plaintiffs] health and peace of mind in denying policy benefits, thus tilting the


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health or safety subfactor in the plaintiffs favor. Id. at 965.

In addressing the above authorities in a footnote, Defendants continue to miss

the point, distinguishing the cases by focusing on the harm caused by the conduct,

rather than the conduct itself. (TB 56.) At the risk of repetition, the health or

safety subfactor turns on an assessment of the latter, not the former. In that vein,

both Roby and Century Surety stand for the proposition that one does not need to

subject a plaintiff to physical harm in order to act in disregard of the plaintiffs

health or safety; instead, conduct that can reasonably be anticipated to have a

detrimental effect on the plaintiffs emotional well-being will suffice. Certainly, the

totality of the evidence in this case shows not only that Defendants conduct didhave

an adverse effect on Plaintiffs emotional and mental health (see, e.g., 2 AER 313-

315, 352-355), but thatfor purposes of the health or safety subfactorit was

objectively reasonable to assume that Defendants acts would have such an effect.

Roby, 47 Cal.4th at 713.

Moreover, it is important to stress that the health or safety subfactor is

disjunctive. State Farm, 538 U.S. at 419. Thus, conduct that is not necessarily

calculated to threaten a persons safety can nonetheless be designed to haveand

actually havean impact on that same persons health and well being. The Century

Surety court drove that point home by highlighting the defendants indifference to


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the plaintiffs peace of mind. 139 Cal.App.4th

at 965. Here, Defendants charges

of fraud, embezzlement, and the like constituted not only an attack on Plaintiffs

business reputations, but their personal reputations as well, and the actual harm

produced went well beyond pure economics. (SB 18.)

B. The Financial Vulnerability Subfactor Favors Plaintiffs.With respect to Plaintiffs financial vulnerability, Defendants tender an

argument borne from the playgroundthey started it. (TB 56-57.) In addition to

the fact that the argument is based on a faulty factual premise (SB 8, 12; see, ASER

5-6, 8-9), it is unreflective of any legitimate legal defense. As the district court

stated during trial regarding the defense of you defamed me, therefore I can defame

you: You know thats not law. (ASER 4; see, also, ASER 10 [court tells defense

counsel that theres only a libel action against your clients, and they cant justify

their libel even assuming that there was libel on the other side.].) And, regarding

the timing of the January 10 email exchange in which Joseph Baumann and Roy

Pinto committed to smashing these people (1 AER 195), that exchange took place

right in the middle of the worst of Defendants defamatory communicationsone

week after the January 3 hit piece transmitted by Baumann on Defendants behalf

(Exh. 16D [4 ER, Tab 55]; 2 AER 382-384), ten days before CUSAs Operation

Kill ACO meeting (Exh. 16V [1 AER, p. 207]), and two weeks before Mike


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Jimenezs PLEASE BEWARE letter to correctional officers and organizations

throughout the country. (Exh. 1038 [1 AER, pp. 199-200].) The timing and content

of the January 10 email exchange serve as powerful evidence of a concerted effort to

cause Plaintiffs financial ruin by any means necessary.4 Defendants attempt to

paint the exchange as merely a discussion of how best to defend Plaintiffs lawsuit

blows through all bounds of credibility, and the jury was not required to accept such

a milquetoast characterization in conducting its analysis.

Furthermore, as to Defendants indiction that Plaintiffs cite to just one

exhibit on the subject of financial vulnerability (TB 56), that one exhibit was

cited to highlight Defendants knowledge of that vulnerability. However, the

financial vulnerability subfactor does not focus merely on the bad actors knowledge,

but on the more basic question of whetherthe target of the conduct hadfinancial

vulnerability. State Farm, 538 U.S. at 419 (emphasis added). Plaintiffs presented

plenty of evidence at trial that established the fact of that vulnerability, and cited it in

their Second Brief. (SB 18, citing 2 AER 308-315, 325-328, 353-355.) Defendants

knowledge of that vulnerability is just another brick in the wall.

4By contrast, the email from Dawe to Harkins cited by Defendants (TB 56-57)which dealt with discovery requests to be propounded to Defendantswas written inMay of 2007, months after Defendants had administered the coup de grace toPlaintiffs new business efforts. (1 SER 9, p. 67, third paragraph.)


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C. The Pattern and Practice Subfactor Favors Plaintiffs.In regards to the pattern and practice subfactor, Defendants argue that their

sustained campaign of defamation should be viewed as a singular act. Invoking

several decisions, including Simon v. San Pablo U.S. Holding Co., Inc., 35 Cal.4th

1159 (2005) and Amerigraphics v. Mercury Cas. Co., 182 Cal.App.4th 1538 (2010),

Defendants contend that the subfactor only applies where a defendant has engaged

in similar misconduct, against the same or different parties, outside the context of the

dispute at issue. (TB 58 [emphasis in original].) That argument is also misguided.

Indeed, Simon, Amerigraphics, and the other two cases cited by Defendants in

which recidivism was not found (Walker v. Farmers Ins. Exchange, 153

Cal.App.4th 965, 975 (2007) and Park v. Mobil Oil Guam, 2004 WL 2595897, at *13

(2004)) are easily dismissed because they involve either (a) a single breach of

contract and/or (b) repeated performance of the same act over an extended period of

time. A more instructive analysis is found in Bardis v. Oates, 119 Cal.App.4th 1

(2004). There, the defendant formed a partnership with the plaintiffs and

subsequently engaged in a series of unsavory business practices, including charging

an unauthorized fee for managing the partnership, marking up vendor invoices and

retaining the marked-up amounts, and misappropriating commissions due the


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partnership. (Id. at 6-9.) In evaluating the reprehensibility of the defendants

conduct, the court found repeat offender status because

the kickbacks, markups and concealed commissions werepart of a systematic pattern by [the defendant] of bilkinghis partners out of funds legitimately belonging to thepartnership. He repeatedly fleeced the partnership to linehis own pockets.

Id. at 22.

Bardis bears a far closer resemblance to this case than the decisions cited by

Defendants. Like the defendant in Bardis, Defendants also engaged in a systematic

pattern of misconduct; here, that conduct was designed to undercut, defame, and

financially wreck Plaintiffs. Defendants are every bit the repeat offender of the

Bardis defendant, and, to paraphrase Defendants, all of the conduct at issue in both

cases came inside, not outside, the context of the dispute at issue.

Defendants close their discussion of the pattern and practice subfactor with

the indication that [f]ollowing Plaintiffs logic, any time there is more than one

publication of a defamatory statement, the defendant would automatically become a

recidivist. (TB 60.) That is an alarmist indication, at best. Certainly, if one

defamatory publication was thereafter republished, that circumstance would likely

not establish a pattern and practice. (Nor would an insurers persistent denial of a

defenseWalker, 153 at 975.) Of course, that is notthe circumstance presented


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here; instead, this case involves multiple publications ofseveral differentdefamatory

communications to a variety of recipients over a period of months.

D. The Malice, Trickery, and Deceit Subfactor Favors Plaintiffs.As to malice, trickery, and deceit, Defendants argue that despite the jurys

acknowledged finding of malice, a punitive damage award exceeding a 1:1 ratio is

not justified because [t]his was a garden variety business dispute where the talk

(by both sides) was macho-tough and colorful. (TB 61.) That argument is triply

inapt.

First, as stated above, Defendants cannot escape the consequences of their

conduct by referring back to Plaintiffs statements, and the district properly rejected

the proposition that you defamed me, therefore I can defame you. (ASER 4.)

Second, Defendants publications went far beyond macho-tough talk. To be sure,

it is not macho to accuse another person of embezzlement, fraud, conversion, using

organization funds to fall off the wagon,5 and being a conit is defamatory.

5Defendants state that Mr. Dawe admitted that he was not bringing a defamation

claim on the falling off the wagon statement. (TB 11.) While the statement iscorrect as far as it goes (because Mr. Dawe was a recovering alcoholic who wouldoccasionally have a drink while on the road recruitingthus falling off thewagon), the clear gist or sting of the statementespecially when read inconjunction with the remainder of the January 3, 2007 emailis that Dawe wasusing CUSA funds as his own personal mad money, including as a personal boozefund. Thus, the communication, including the on and off the wagon phrase, is(footnote continued)


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Finally, with regard to the notion that their conduct was merely the product of a

garden variety business dispute, Defendants give no explanation of why that

matters. Under Defendants apparent worldview, Bardis would also be

characterized as a garden variety business dispute. However, the court in that case

held that [t]he record...overwhelmingly supports a finding that the harm was caused

as the result of intentional fraud, malice and deceit so as to justify a punitive

damage ratio of 9:1. Id. at 22, and generally at 22-27.) Therefore, even if

Defendants labeling of this dispute were accurate (a proposition with which

Plaintiffs disagree), that label would have no impact whatsoever on the degree of

malice, trickery, and deceit that imbued Defendants actions.

actionable. As stated by a leading commentator: Proof that part of a defamatorypublication is true does not bar liability completely. The plaintiff is entitled to

recover damages for any material part of a defamatory publication that is not true.Nor does merely proving the literal accuracy of every fact in a publicationnecessarily bar liability. The defamatory implications of statements must be true aswell as the statements themselves. Levy, Golden and Sacks, California Torts, 45.10[3], at p. 45-50.1 (Matthew Bender 2009)(emphasis added, internal citationsomitted).


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V. THE PERMISSIBILITY OF THE JURYS PUNITIVE DAMAGEAWARD AGAINST CCPOA IS NOT DETERMINED BY CCPOAS

NET WORTH

Defendants finish their brief by arguing that the district courts remittitur of

the punitive damage award against CCPOA was proper because punitive damages

generally do not exceed ten percent of a defendants net worth, while the award in

this case represented almost one-and-a-half times [CCPOAs] net worth

obviously a financially devastating amount. (TB 63 [emphasis in original].) Here

again, Defendants are mistaken.

A. Net Worth is Not the Overarching Analytical Touchstone, and aJurys Award May Permissibly Exceed Ten Percent of Net

Worth.

To begin with, the ten percent of net worth rule for which Defendants

advocate is no rule at all. Indeed, case law makes clear that a proper punitive

damages analysis does not turn on defendants net worth, but on whether the

amount of damages exceeds the level necessary to properly punish and deter. Zaxis

Wireless Communications, Inc. v. Motor Sound Corp., 89 Cal.App.4th 577 (2001)

(emphasis added).

In Zaxis, a punitive damage award of $300,000 against a corporation was

upheld despite the fact that the corporation technically had a net worth ofnegative

$6.3 million. Id. at 579-580. In reaching its decision, the court noted that the


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California Supreme Court has expressly declined to adopt net worth as the standard

for determining a defendants ability to pay in any given situation (citing Adams v.

Murakami, 54 Cal.3d 105, 116 (1991)), and itself concluded that [n]et worth is too

easily subject to manipulation to be the sole standard for measuring a defendants

ability to pay. Zaxis, 89 Cal.App.4th at 582; see, also, Lara v. Cadag, 13 Cal.App.4th

1061, 1064-1065 & fn. 3 (1993) (Net worth is subject to easy manipulation and, in

our view, it should not be the only permissible standard. Indeed, it is likely that

blind adherence to any one standard could sometimes result in awards which neither

deter nor punish or which deter or punish too much.); Michelson v. Hamada, 29

Cal.App.4th 1566, 1596 (1994); Rufo v. Simpson, 86 Cal.App.4th 573, 624-625

(2001). Therefore, in the words of the Zaxis court, it was appropriate for the jury to

consider[] net worth and a variety of other factors included on the financial

documents presented by Zaxis to conclude Motor Sound had the ability to pay a

punitive damage award of $300,000. 89 Cal.App.4th at 583 (emphasis added).

Among other things, those documents showed Motor Sound earned hundreds of

millions of dollars in 1997 and 1998 but had a net loss. Ibid. see, also, Rufo, 86

Cal.App.4th at 624-625 (punitive damage award exceeding defendants net worth

upheld based on other evidence of financial condition); Mathias, 347 F.3d at 677-678

(net worth is not the correct measure of a corporations resources, but an


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accounting artifact).

These tenets are borne out by the accounting literature, which makes clear that

a myopic focus on net worth is not appropriate:

In addition to evaluating the venture profits and therelevant entitys net worth, the ability of an individual,division, or company to generate cash flows may berelevant to the analysis of punitive damages. [] Inevaluating an entitys ability to generate cash, one shouldfocus on the future ability, not the past. As a result of past

success, some companies have generated a large networth, but due to changes in competition or demand fortheir products or services now earn little. There are alsostart-up companies that incur large development expensesto get started and have a large negative net worth, butcurrently or in the future have the ability to earnsubstantial profits. If the decision maker ignores cashflow and focuses on the entitys net worth, the formerentity may be overdeterred and the latter company will be

underdeterred.

Weil, Wagner & Frank, Litigation Services Handbook: The Role of the Accountant

as Expert (2nd ed.), 36.5, at pp. 36-9 36-10).

B. CCPOAs Stated Net Worth Is Not Legitimately Indicative of ItsFinancial Condition.

The above considerations come home to roost in the captioned matter, and

demonstrate the malleability (and unreliability) of net worth in this case. First,

even looking at CCPOAs ascribed net worth in isolation, that net worth

according to Chief Financial Officer Jeff Nicolaysen and the financial statement he


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preparedswung from $6,992,199 during the week of October 11, 2010 to

$4,704,794 the very next week. (ASER 20-21, 25-26; Exh. 1182, p. 1 [ASER 46]

[heading entitled Total Net Assets].) And, that one-third decline was solely

attributable to the $2,287,405 compensatory judgment in this case. (ASER 26; Exh.

1182, p. 1 [ASER 46] [heading entitled Accounts Payable-Court Decision: Dawe v.

CUSA].) Unless CCPOA has plans to get hit with various other multi-million dollar

verdicts on a yearly basis, we are faced with a situation where Defendants would

severely limit the jurys punitive damage award based on a unique event.

Second, the additional evidence and testimony brought out through Mr.

Nicolaysen (who was designated by CCPOA as its person most knowledgeable

regarding financial conditionASER 18-19) is telling, and shows exactly why net

worth cannot be viewed as an analytical panacea. Among other things, the

following information was elicited from Mr. Nicolaysen:

CCPOA depressed its cash balance from $3.47 million on August 31,

2010 to $1.87 million by the time of Mr. Nicolaysens October 22,

2010 trial testimony. (ASER 27-28.)

Of the $2.5 million in CCPOAs accounts payable owing at the time

of Mr. Nicolaysens testimony, approximately $1.5 million was

attributable to attorneys fees owed by CCPOA for services rendered in


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this case to two firms (for the services of approximately ten lawyers).

(ASER 22-23.) Mr. Nicolaysen acknowledged that such was not an

expenditure that was going to be repeated on an ongoing annual basis.

(ASER 24-25.)

CCPOA budgeted approximately $4.5 million in legal expenses for

fiscal year 2010-2011. That estimate, in turn, was based on

expenditures incurred the prior yeari.e., while this litigation was in

full stride. (ASER 32-33; Exh. 1183, p. 2, Item 28 [ASER 49].)

CCPOAs fiscal year 2010-2011 budget saw CCPOAs 90 or so

employees being paid a total of $7.74 million, for an annual average of

approximately $86,000 per employee. (ASER 31; Exh. 1183, p. 3, Item

56 [ASER 50].) That did not include the budgeting of an additional

$3.37 million for employee benefits. (ASER 33; Exh. 1183, p. 1,

Item 18 [ASER 48].)

CCPOA budgeted approximately $3.6 million for political action

committee expenditures for fiscal year 2010-2011. (ASER 33; Exh.

1183, p. 2, Item 40 [ASER 49].)

CCPOAs four largest budget items for fiscal year 2010-2011legal

expenses, employee salaries, employee benefits, and political action


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committee fundingtotaled approximately $19.2 million, or more than

four times CCPOAs claimed net worth. (ASER 33-34; Exh. 1183,

Items 18, 28, 40, and 56 [ASER 48-50].)

Other budgeted items for fiscal year 2010-2011 included $1.8 million

for advertising and public relations, $409,510 for lobbyist expenses

(in addition to the above-referenced PAC costs), $258,000 for political

coordination, $350,000 for executive board expenses, $380,000 for

travel, food, and lodging, and $525,000 for legal defense (in

addition to the above-referenced $4.5 million in legal fees). All told,

the total amount of CCPOAs budgeted expenditures for fiscal year

2010-2011 was over $29.9 million, or approximately 6.4 times

CCPOAs claimed net worth. Critically, none of those figures played

any role in Mr. Nicolaysens analysis of CCPOAs net worth. (ASER

34-37; Exh. 1183, Items 22, 27, 31, 45, 64, and Total [ASER 48-51].)

CCPOA owned (a) its West Sacramento headquarters for which it paid

$4,000,000; (b) a piece of land in Rancho Cucamonga for which it paid

$700,000; and (c) two houses in Natomas for which it paid $600,000,

and which were used as the weekday residences of CCPOA Executive

Council members Chuck Helton and Perry Speth. All of these pieces of


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real property were owned free and clear. (ASER 37-40.) CCPOA also

paid for an apartment for the individual who, among other apparent

duties, operated as President Mike Jimenezs driver. (ASER 40-41.)

In 2010, CCPOA purchased eight vehicles at a total cost of

approximately $160,000-$176,000. CCPOA purchases between five

and eight new vehicles each year. (ASER 42.)

CCPOA annually purchases half a box for Sacramento Kings games,

costing approximately $230,000 per year. (ASER 43-44.)

CCPOA annually purchases a box for Sacramento River Cats games,

costing approximately $23,000 per year. (ASER 45.)

Most importantly, CCPOA has approximately 31,300 members, which

number has stayed roughly the same over the years. Monthly revenues

from CCPOA members total approximately $2.49 million, orabout

$29.88 million per year. (ASER 29-30.)

In light of the above considerations (similar considerations attend to the

analysis of the financial condition ofCUSA, which was bringing in approximately


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$800,000 per year when Plaintiffs were kicked outASER 26), it would be the

height of form over substance to accord any significant weight to CCPOAs net

worth numbers, much less to conclude that the jury was somehow restricted to a

mere ten percent of those already meaningless numbers in arriving at an appropriate

punitive damage figure.

VI. CONCLUSIONGiven the above, as well as the discussion set forth in Plaintiffs Second Brief,

Plaintiffs request that the punitive damage awards in this case be restored to the

amounts set forth on pages 64 and 65 of Plaintiffs Second Brief.

Respectfully submitted,

6 Plaintiffs note this fact in light of Defendants passing argument that remittitur ofGary Harkins punitive damage award against CUSA was appropriate because ofCUSAs very limited net worth. (TB 49.)

DATED: May 18, 2012 WILKE, FLEURY, HOFFELT,

GOULD & BIRNEY, LLP

By: /s/ Daniel L. Baxter

DANIEL L. BAXTERAttorneys forAppellees/Cross-Appellants

BRIAN DAWE; FLAT IRONMOUNTAIN ASSOCIATES, LLC; and

GARY HARKINS


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CERTIFICATE OF COMPLIANCE

Pursuant to Federal Rule of Appellate Procedure 32(a)(7)(C) and Ninth Circuit

Rule 32-1, I certify that the text of this brief (including footnotes) is proportionately

spaced, has a typeface of 14 points, and consists of 6,124 words, as counted by the

MicroSoft Word word processing program used to generate the brief.

DATED: May 18, 2012

/s/ Daniel L. BaxterDANIEL L. BAXTER


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CERTIFICATE OF SERVICE

United States Court of Appeals for the Ninth Circuit, Case Nos. 11-16284 and 11-16416

I hereby certify that on May 18, 2012, I electronically filed the Fourth Cross-Appeal Brief: Cross-Appeal Reply Brief of Appellees/Cross-Appellants Brian

Dawe, Flat Iron Mountain Associates, LLC, and Gary Harkins with the Clerk ofthe Court for the United States Court of Appeals for the Ninth Circuit by using theappellate CM/ECF system. I certify that all participants in the case are registeredCM/ECF users and that service will be accomplished by the CM/ECF system.

I further certify that on May 18, 2012, I filed via overnight delivery fourcopies ofAdditional Supplemental Excerpts of Record, Volume 1 with the Clerkof the Court for the United States Court of Appeals for the Ninth Circuit, andadditionally served one copy of those Excerpts via overnight delivery to thefollowing recipients:

Michael M. BergerThomas J. Umberg

Manatt, Phelps & Phillips, LLP11355 West Olympic Boulevard

Los Angeles, CA 90064

DATED: May 18, 2012

/s/ Daniel L. BaxterDANIEL L. BAXTER

794898.1

Documents

Dawe Closing Brief on Appeal