Opinion
CAUSE NO. IP 02-0170-C-H/K.
June 24, 2005
Michael R. Fruehwald Barnes Thornburg Indianapolis, IN.
Linda Pence sommer Barnard Ackerson, PC Indianapolis, IN.
James J. Scheske Akin Gump Strauss Hauer Feld, LLP Austin, TX.
ENTRY ON RENEWED MOTION FOR JUDGMENT AS A MATTER OF LAW AND MOTION FOR NEW TRIAL
A jury found that defendant Thrifty Call, Inc. conspired with other businesses and individuals to defraud plaintiff Indiana Bell Telephone Co. (known as "Ameritech Indiana"). The jury found liability under state law for fraud and conspiracy to defraud, as well as under the Indiana Crime Victim Civil Remedy statute, Ind. Code § 34-24-3-1 et seq.
The evidence showed that members of the conspiracy set up companies called E-Tex Data and Ward Products. Ward Products falsely told Ameritech Indiana that it would be making a high volume of outgoing local calls for telemarketing in the Indianapolis area. Ward Products paid Ameritech Indiana a flat monthly rate for the high volume telephone circuits. In fact, however, the conspirators routed through those circuits a high volume of long distance calls from Thrifty Call's network to call recipients in the Indianapolis area. By concealing the true nature of the telephone traffic and paying the flat local rates, the conspirators saved several million dollars, as compared to the significantly higher rates Ameritech Indiana would have charged under federal tariffs for terminating long distance calls based on minutes of use.
Thrifty Call moved for judgment as a matter of law under Fed.R.Civ.P. 50(a) at the close of Ameritech's case and at the close of the evidence. The court denied both motions. On January 19, 2005, the jury found Thrifty Call liable under both common law fraud and the Crime Victim statute. The jury found that Ameritech Indiana's actual damages were $3,128,824.06. The jury also awarded punitive damages on the common law fraud claim and found that additional damages of $3,000,000 should be awarded under the Crime Victim statute. Because the Crime Victim statute precludes recovery of both an award of punitive damages and a statutory award of more than actual damages, Ind. Code § 34-24-3-3, Ameritech Indiana elected to recover judgment on its claim under the Crime Victim statute for $3,128,824.06 in compensatory damages and $3,000,000 in additional damages, totaling $6,128,824.06. On February 11, 2005, the court entered judgment in favor of Ameritech Indiana in the total amount of $7,255,200.66 on its Crime Victim claim and its request for prejudgment interest on the compensatory damages.
Defendant Thrifty Call then renewed its motion for judgment as a matter of law under Rule 50(b) seeking judgment on all claims. In the alternative, Thrifty Call moved for a new trial under Rule 59(a). Rule 50(b) allows a party to renew its Rule 50(a) motion for judgment as a matter of law and to file at the same time an alternative motion for a new trial pursuant to Rule 59. EEOC v. Preferred Management Corp., 226 F. Supp. 2d 957, 959 (S.D. Ind. 2002). For the reasons discussed below, the court denies both Thrifty Call's renewed motion for judgment as a matter of law and its motion for a new trial.
I. Judgment as a Matter of Law
A district court may grant judgment as a matter of law where "there is no legally sufficient evidentiary basis for a reasonable jury to find for" the prevailing party. Honaker v. Smith, 256 F.3d 477, 484 (7th Cir. 2001); EEOC v. Preferred Management, 226 F. Supp. 2d at 959. The court may set aside the jury's verdict and enter judgment as a matter of law only when, without resolving conflicts in the testimony or otherwise considering the weight of the evidence, the evidence is such that a reasonable jury could reach only one conclusion. Lane v. Hardee's Food Systems, Inc., 184 F.3d 705, 706-07 (7th Cir. 1999); Klunk v. County of St. Joseph, 170 F.3d 772, 775 (7th Cir. 1999); see generally Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250-51 (1986) (same standard applies for summary judgment and judgment as a matter of law). The evidence in support of the verdict must be substantial. Honaker, 256 F.3d at 484. A mere scintilla of evidence in support of the verdict is not sufficient to defeat judgment as a matter of law. Id.; Massey v. Blue Cross-Blue Shield of Illinois, 226 F.3d 922, 924 (7th Cir. 2000). Thrifty Call has renewed its motion for judgment as a matter of law based on ten grounds, which the court addresses in two sets.
A. The Roles of Federal and State Law
The first four grounds address issues of federal preemption and jurisdiction and the application of federal law to Ameritech Indiana's claims. The court has previously rejected all of these arguments. Thrifty Call contends: (1) plaintiff's state law claims are preempted by the Federal Communications Act ("FCA"), 47 U.S.C. § 151 et seq.; (2) the claims should have been referred to the Federal Communications Commission ("FCC") under the doctrine of primary jurisdiction; (3) the claims are barred by the FCA two-year statute of limitations; and (4) plaintiff may not recover tariff-based access fees from Thrifty Call because Thrifty Call was not plaintiff's customer for the services at issue.
The court held at the motion to dismiss stage that Ameritech Indiana's claims for fraud were not preempted by the FCA. Indiana Bell Telephone Co. v. Ward, 2002 WL 32067296 (S.D. Ind. Dec. 6, 2002) (entry denying Thrifty Call's motion to dismiss). In the same entry, the court rejected Thrifty Call's primary jurisdiction argument. The court rejected the statute of limitations defense at the summary judgment stage, finding that Ameritech Indiana's claims for fraud did not seek recovery of "lawful charges," did not arise under the FCA, and were not subject to the two-year limit in 47 U.S.C. § 415(a). See Indiana Bell Telephone Co. v. Thrifty Call, Inc., 2004 U.S. Dist Lexis 26429 (S.D. Ind. Dec. 2, 2004) (entry denying Thrifty Call's motion for summary judgment). The court also concluded that the two-year statute of limitations in § 415(b) did not apply to plaintiff's claims. The court also held at the summary judgment stage that plaintiff was entitled to pursue its state law claims against Thrifty Call regardless of whether Thrifty Call was plaintiff's direct customer. Plaintiff could assert its state law claims against a non-customer that conspired with the direct customer. The court concluded that plaintiff's claims were state law fraud claims in substance as well as form. Indiana Bell, 2004 U.S. Dist Lexis 26429, at *11.
Under Indiana law, actions for relief against fraud are subject to a six-year statute of limitations. Ind. Code § 34-11-2-7. At the summary judgment stage, Thrifty Call had argued that the federal statute of limitations in 47 U.S.C. § 415(b) should apply to some claims against carriers that do not arise under the FCA and that are neither governed by federal law nor preempted by federal law. The court rejected that argument. The savings clause in § 414 preserves state law claims that are not intended to challenge, enforce, or invalidate a tariff.
After trial, Thrifty Call has not come forward with new authority suggesting that the court needs to revisit those earlier decisions. In light of the jury verdict finding that Thrifty Call conspired with others in a criminal scheme to defraud Ameritech Indiana of millions of dollars, the court sees no other basis for reversing course on those issues.
In fact, the post-trial arguments reinforce the court's earlier views. To support its primary jurisdiction defense, Thrifty Call suggests that the judgment here effectively imposes a new duty on telecommunications companies to scrutinize closely the start-up companies who want to deal with them, raising issues of broad public importance in the telecommunications industry. The argument turns a blind eye to the basis for the jury's verdict: Thrifty Call actively conspired with others (who were prosecuted and went to prison) in a knowing, deliberate, and criminal scheme to defraud Ameritech Indiana. The only duty involved here is the duty to refrain from knowing and active participation in a criminal scheme to defraud. The case does not present a public policy problem requiring the FCC's expertise.
Further, Thrifty Call's first four arguments show, when combined, that it believes the law should not provide any remedy to the victims of such a criminal scheme to defraud. Under Thrifty Call's theory, Ameritech Indiana is really just trying to enforce its federal tariffs, so that the case should be relegated to federal law, procedures, and remedies. Yet under that federal law, Thrifty Call contends, Ameritech Indiana could not enforce the federal tariffs against Thrifty Call at all because Thrifty Call was not a direct customer of Ameritech Indiana. See Def. Motion at 9, citing In re United Artists Payphone Corp. v. New York Telephone Co., 1993 WL 757204 (FCC), 8 FCCR 5563 (1993) (cited for the proposition that, "as a matter of law, a telephone company may only enforce its tariffs against, and collect tariff access fees from, its customer"). If Thrifty Call were correct, then (a) federal law would preempt state law applicable to this criminal scheme to defraud, and (b) federal law would provide no remedy for this criminal scheme to defraud. Thus, as long as the nominal customer was a shell company like Ward Products, those who actually profited from the criminal scheme would walk away with their unlawful gains. To put it simply, something is wrong with that picture. For the reasons explained above and in the court's prior decisions, Thrifty Call is not entitled to judgment as a matter of law on these theories.
B. Sufficiency of the Evidence
Thrifty Call challenges the sufficiency of the evidence on a number of specific issues. First, it argues that there was insufficient evidence to support plaintiff's fraud claims because Thrifty Call itself never made a misrepresentation to the plaintiff. This argument misses the point. Ameritech Indiana showed that agents and co-conspirators of Thrifty Call made the representations. Thrifty Call could be found liable for fraud whether or not its officers or employees directly made a misrepresentation to plaintiff, as long as the misrepresentations were made by persons acting on behalf of Thrifty Call, as the jury found.
Thrifty Call also argues that there was insufficient evidence to support the jury's award of compensatory damages because plaintiff's damages estimates were speculative and unsupportable. The court addressed this argument in the entry awarding prejudgment interest to Ameritech Indiana. Indiana Bell Telephone Co. v. Thrifty Call, Inc., 2005 WL 552260 (S.D. Ind. Feb. 11, 2005). The court concluded that the principal amount of damages was ascertainable based on accepted standards of valuation and fixed rules of evidence. Ameritech presented its damages claim through an accountant who offered three estimates of actual damages. Trial Exs. 112-114. The differences among the three estimates were based on different estimates of one factor: the total minutes of usage for the long distance calls that Thrifty Call terminated through Ameritech Indiana facilities using the fraudulent scheme.
It was necessary to estimate the minutes of usage because defendant Thrifty Call — which the jury found to be a member of a criminal conspiracy to defraud — had destroyed its own records before suit was filed. The jury adopted the middle of the three estimates. Trial Ex. 113. The middle estimate assumed the same call volume that was recorded on the same telephone circuits during July 2000, the month after Thrifty Call sold its assets to a different corporation whose billing records were still available and were obtained in discovery. Substantial evidence supported Ameritech Indiana's estimate of damages.
The remaining four grounds for Thrifty Call's renewed motion for judgment as a matter of law also relate to the sufficiency of evidence. Thrifty Call contends there was insufficient evidence to support: (1) plaintiff's conspiracy claim, because Thrifty Call never agreed with others to harm plaintiff; (2) plaintiff's assertion that Lacy Ward was Thrifty Call's agent for the purposes of doing business with plaintiff; (3) the jury's award of punitive damages; and (4) plaintiff's claim under the Crime Victim statute, because Thrifty Call did not commit, or knowingly or intentionally aid, induce, or cause another to commit, any criminal act that caused injury to plaintiff.
The resolution of these issues, which requires consideration of the credibility of witnesses and the knowledge and intent of Thrifty Call, was the task of the jury. Viewing the evidence in the light reasonably most favorable to plaintiff, and giving plaintiff the benefit of conflicts in the evidence and reasonable inferences drawn from the evidence, the jury could reasonably find that Thrifty Call knew that E-Tex Data was terminating Thrifty Call's long distance traffic on Ameritech Indiana's local lines. Plaintiff was not required to prove that Thrifty Call knew the entire scope of the conspiracy, just as the government is not required to prove such complete knowledge in a criminal prosecution. Cf. Seventh Circuit Federal Jury Instructions — Criminal § 5.08 (1999).
There is ample evidence, of course, that a crime was committed. Ward, Hodges, and Gregg pled guilty to federal fraud charges and went to prison. Ameritech Indiana showed that Thrifty Call conspired with these criminals. That evidence included the terms of the Thrifty Call's contract with E-Tex Data, which strongly indicated that the termination of long distance calls would be handled as if they were local traffic. The contract also included specific provisions for dealing with a termination of the service by the local telephone company, and the jury could easily infer that the provision was put in the contract to cover the possibility that the local telephone companies would figure out how they were being defrauded. Testimony from Ward and letters from GTE Southwest to Thrifty Call in 1996 provided evidence that Thrifty Call knew that Ward had been involved only a year earlier in improperly terminating long distance calls on local lines for Thrifty Call in an essentially identical scheme. Also, of course, the price that E-Tex Data charged to terminate Thrifty Call's long distance traffic was so low as to allow the jury to find that Thrifty Call knew the arrangement must have been illegal. And Thrifty Call was a principal beneficiary of the scheme.
Exhibit 66, a memo from Ward to Thrifty Call management about the progress of the Indianapolis effort, showed that Ward was directly involved on behalf of Thrifty Call in the effort to arrange for the new telephone circuits for terminating the calls. Ward also testified that Thrifty Call CEO Lovelady and Jerry James were in a meeting with him and others where they agreed that different companies should be used in different states, so that if one telephone company figured out how it was being victimized, the companies in other states would be able to continue. In fact, Ward testified that this was CEO Lovelady's suggestion.
Thrifty Call's Gary Gibbs was concerned that Ward was terminating Thrifty Call's long distance calls over local lines and shared his concern with his boss, Harold Lovelady. Lovelady's response to Gibbs' concerns was similar to his response to GTE Southwest's accusations in the Nevada Partners episode (see Trial Exs. 60-63): he said that Thrifty Call had no duty to police the companies that terminated its long distance traffic. Also, Thrifty Call's deliberate arrangements to block caller identification on its long distance traffic to the Indianapolis area were a clear indication that Thrifty Call wanted to make it difficult for Ameritech Indiana to learn the origins of the calls, thus concealing their long distance character.
In sum, Ameritech Indiana presented legally sufficient evidence for a reasonable jury to find that Thrifty Call agreed with others to terminate long distance traffic using Ameritech Indiana's local lines, that Lacy Ward was Thrifty Call's agent for the purposes of doing business with Ameritech Indiana, that punitive damages were appropriate, and that Thrifty Call knowingly joined in a criminal scheme to defraud that caused injury to Ameritech Indiana. Simply put, the jury apparently did not believe Harold Lovelady's story that neither he nor anyone else at Thrifty Call knew that Thrifty Call's long distance calls were being unlawfully terminated on Ameritech's local lines. Finally, the fact that the conspirators were not entirely honest in their dealings among themselves is neither surprising nor a basis for rejecting the jury's verdict that there was a conspiracy and that Thrifty Call was a member.
Although much of the evidence was circumstantial, there was a substantial evidentiary basis to support the jury's verdict. Accordingly, the court denies Thrifty Call's renewed motion for judgment as a matter of law.
II. Motion for New Trial
In ruling on a motion for new trial, the court must determine whether "the verdict is against the weight of the evidence . . . the damages are excessive, or . . . for other reasons, the trial was not fair to the party moving." General Foam Fabricators, Inc. v. Tenneco Chemicals, Inc., 695 F.2d 281, 288 (7th Cir. 1982). Further standards specific to the grounds for Thrifty Call's motion are discussed below.
Thrifty Call contends it is entitled to a new trial for five reasons: (1) it was substantially prejudiced by improper admission and exclusion of evidence; (2) the jury's verdict was against the weight of the evidence; (3) the jury's verdict was internally inconsistent; (4) the jury's damages award was excessive and not supported by the evidence; and (5) the court improperly instructed the jury on the governing law. In the alternative, Thrifty Call requests the court to remove or reduce the award of prejudgment interest.
A. Evidentiary Rulings
Thrifty Call challenges two evidentiary rulings by the court: (1) the court's decision to admit evidence relating to Thrifty Call's prior business relationship with Nevada Partners and GTE Southwest's 1996 allegations of wrongdoing against Thrifty Call (Trial Exs. 60-63) and related trial testimony; and (2) the court's decision to exclude evidence of a prior dispute between Ameritech and Thrifty Call's subsidiary Golden Harbor of Indiana (Trial Ex. 204). An error in the admission or exclusion of evidence is not grounds for granting a new trial or for setting aside a verdict unless refusal to take such action appears inconsistent with substantial justice. Fed.R.Civ.P. 61; Hasham v. California State Bd. of Equalization, 200 F.3d 1035, 1048 (7th Cir. 2000). "A trial judge's evidentiary errors satisfy this standard only if a significant chance exists that they affected the outcome of the trial." Hasham, 200 F.3d at 1048. The court does not believe either decision was erroneous. 1. Admission of Defendant's Deal with Nevada Partners
In 1996, Thrifty Call was doing business with Lacy Ward through his Nevada Partners business, which terminated long distance calls for Thrifty Call using GTE Southwest's lines. The following year, Ward was working for Thrifty Call and was also operating E-Tex Data and Ward Products, which unlawfully terminated Thrifty Call's long distance traffic over local Ameritech lines, the subject of this case.
In a letter to Thrifty Call dated April 2, 1996, GTE Southwest charged that Thrifty Call was terminating long distance call traffic over local lines. Trial Ex. 60. Thrifty Call responded with a request for specific information. Trial Ex. 61. GTE sent specific information in a letter dated June 3, 1996, and alleged that an end-user customer was terminating Thrifty Call long distance traffic in Texas over local GTE lines. Trial Ex. 62. Thrifty Call responded by letter on June 7th and stated that if GTE's end user was improperly terminating Thrifty Call's long distance traffic, that was "a matter between GTE and its end user." Trial Ex. 63. There is no evidence that GTE ever followed up on its allegations. According to Thrifty Call, evidence of GTE's allegations was highly prejudicial and should have been excluded under Fed.R.Evid. 403, was inadmissible hearsay under Rule 802, and was inadmissible character evidence under Rule 404(b).
In the entry on the final pretrial conference, the court ruled that Exhibits 60-63 would be admissible under Rule 404(b) and also appeared unlikely to be excluded under Rule 403. Docket No. 139. During the trial and outside of the presence of the jury, the court again heard Thrifty Call's objections to the admission of Exhibits 60-63. Thrifty Call argued that the exhibits, particularly exhibits 60 and 62, were inadmissible hearsay and that a limiting instruction would not protect Thrifty Call's rights. Ameritech countered that its interest was not in the truth of the statements, but rather in providing evidence of what Thrifty Call was told about Lacy Ward terminating long distance calls on local telephone lines and of Thrifty Call's response to the claim and any investigation of what Ward was doing. Thrifty Call's main defense in this case has been that it did not know that E-Tex Data and Ward Products were terminating Thrifty Call's long distance traffic unlawfully. Ameritech Indiana thus sought to use Exhibits 60-63 as evidence of what Thrifty Call knew about Lacy Ward and his operations.
The court ruled that the evidence of the Nevada Partners episode was admissible to show the knowledge of Harold Lovelady in particular and of Thrifty Call in general about Lacy Ward and his offers to terminate long distance calls, and more generally about lowball rates for terminating long distance call. The Nevada Partners situation involved an arrangement very similar to the arrangement with E-Tex Data. The jury could conclude that Lovelady knew that Ward had carried out a similar fraudulent scheme only a year earlier, which tended to refute Lovelady's and Thrifty Call's denials of knowledge or intent. With respect to the hearsay objections to the GTE letters, the court ruled that the letters were not being offered for the truth of the matter but only to show that Lovelady had reason to question termination arrangements being offered by Ward, and that a limiting instruction was sufficient. (In any event, Ward's testimony corroborated the contents of the GTE accusations, so the hearsay character of the letters was not prejudicial in any event.) The court also ruled that the probative value of the evidence, given the central role of Thrifty Call's knowledge and intent, was not outweighed by the danger of unfair prejudice. Thrifty Call offers no new arguments to warrant a change in the court's prior rulings on Exhibits 60-63.
The court instructed the jury not to treat Exhibits 60 and 62 as evidence that what the exhibits stated was true, but said that the jury could consider the letters to help evaluate Thrifty Call's conduct and state of mind in its later dealings with Lacy Ward and others involved in the Ameritech Indiana and Ameritech Michigan transactions.
2. Exclusion of Golden Harbor Dispute
Thrifty Call sought to introduce a January 19, 2000 order issued by the Indiana Utility Regulatory Commission (IURC) detailing Ameritech Indiana's delay in providing local connection services to Golden Harbor of Indiana, a Thrifty Call subsidiary, during 1998 and early 1999. See Trial Ex. 204. The IURC found that Ameritech's delay in providing services violated Indiana law, granted a request by Golden Harbor to extend the interconnection agreement between Ameritech and Golden Harbor, and admonished the parties to negotiate in good faith a further renewal of the interconnection agreement. Id.
Outside the presence of the jury, the court heard arguments on the admissibility of Exhibit 204. Thrifty Call offered the exhibit to show its state of mind as to whether E-Tex Data, in Thrifty Call's view, could have obtained a substantial amount of local connections from Ameritech Indiana. Ameritech objected that the exhibit was irrelevant. The court sustained Ameritech's objection under Rules 404(b) and 403. Thrifty Call's contract with E-Tex Data was executed on April 30, 1997. Ward Products' misrepresentations to Ameritech Indiana were made in June and July 1997. Ward Products' purchase order for local lines from Ameritech was executed on September 19, 1997. In contrast, the IURC addressed events that occurred in 1998-2000, well after Thrifty Call and the others entered into the conspiracy to defraud. The court also found that the probative value of the evidence would be substantially outweighed by danger of unfair prejudice and waste of time. The court explained that Thrifty Call CEO Lovelady was entitled to explain why he did not believe he and Thrifty Call were doing anything wrong, but to go beyond that by admitting external evidence such as the IURC findings about later events to bolster his belief did not pass the tests of Rule 404(b) or Rule 403.
The court allowed Lovelady to testify as to his recollection of the timing of Ameritech Indiana's resistance to Golden Harbor's request for local interconnection and why that resistance supported his assertion that he lacked knowledge of E-Tex Data's use of Ameritech Indiana's local lines to terminate long distance calls.
Thrifty Call now argues that plaintiff misrepresented the Golden Harbor controversy and that Exhibit 204 was highly relevant as evidence of Thrifty Call's state of mind. The court disagrees that plaintiff misrepresented the controversy to the court. The court finds nothing new or persuasive in Thrifty Call's arguments. Also, with the benefit of hindsight, Thrifty Call's theory of relevance appears even more elusive than it seemed at trial. The fact that Ameritech Indiana and a Thrifty Call subsidiary were jousting over an interconnection agreement in Indiana could not reasonably have allowed Thrifty Call to believe that the terms offered by E-Tex Data were legitimate, rather than the product of concealing the nature of the traffic that the lines would carry. Accordingly, the exclusion of Exhibit 204 was not an error and does not justify a new trial.
B. Weight of Evidence
Thrifty Call contends that the great weight of the evidence was against the verdict for Ameritech Indiana, and it offers three more specific grounds: (1) there was no evidence or testimony produced at trial that Lacy Ward was Thrifty Call's agent or employee with respect to the transactions with Ameritech Indiana; (2) there was no credible evidence or testimony that Thrifty Call reached an agreement with E-Tex Data, Ward Products, Lacy Ward, or others to defraud Ameritech, thus undermining the jury finding that Thrifty Call joined a conspiracy; and (3) the great weight of the evidence established that Thrifty Call did not knowingly or intentionally aid, induce, or cause others to commit crimes covered by Indiana's Crime Victim statute, so that plaintiff failed to establish the required mens rea element of the crimes. These arguments are unpersuasive.
In ruling on a motion for a new trial, the district court may weigh the evidence and assess the credibility of witnesses. Unlike the consideration of a motion for judgment as a matter of law, the court is not required to view the evidence in a light most favorable to the verdict winner. See Thomas v. Stalter, 20 F.3d 298, 304 (7th Cir. 1994) (affirming district court order granting new trial); 11 Wright, Miller Kane, Federal Practice and Procedure: Civil 2d § 2806. However, a party seeking to establish the need for a new trial based on the weight of the evidence carries a substantial burden. A district court may grant a new trial because the verdict was against the weight of the evidence "only when the record shows that the jury's verdict resulted in a miscarriage of justice or where the verdict, on the record, cries out to be overturned or shocks [the court's] conscience." Latino v. Kaizer, 58 F.3d 310, 315 (7th Cir. 1995) (district court abused discretion by granting a new trial based on weight of evidence; trial judge improperly usurped jury's role in deciding the most reasonable inferences to be drawn from the evidence); accord, Cefalu v. Village of Elk Grove, 211 F.3d 416, 424 (7th Cir. 2000) ("Only when a verdict is contrary to the manifest weight of the evidence should a motion for a new trial challenging the jury's assessment of the facts carry the day.").
The jury determined that Lacy Ward was acting within the scope of his employment and agency with Thrifty Call when he made misrepresentations to Ameritech Indiana. As explained to the jury in Final Jury Instruction No. 16:
An employee's act is within the scope of his employment only if it is in the service of his employer. An act is not within the scope of employment if the employee committed it with no intention to perform it as part of or incident to the service for which he is employed. However, an employee's act may fall within the scope of his employment if his purpose, to an appreciable extent, was to further his employer's business, even if the employee was also motivated predominantly by an intention to benefit himself.
A corporation can be liable for any knowingly or recklessly false statements by its agent undertaken in the course of and within the scope of the agency, whether or not other human beings connected with the corporation knew of the false statements. An agent of a corporation is an individual or another company that acts on behalf of the corporation, with the corporation's consent and subject to the corporation's control.
The jury could reasonably find from Ward's own testimony and from the circumstantial evidence that Ward's negotiation with Ameritech Indiana for local lines fell within the scope of his agency and employment with Thrifty Call.
More broadly, the jury also found that Thrifty Call had joined a conspiracy to defraud Ameritech Indiana. There is ample evidence of that conspiracy, as outlined above at pages 10 and 11.
At trial, Thrifty Call offered the denials of personal knowledge by Lovelady and Jerry James, but their testimony was not inherently more credible than the testimony of plaintiff's witnesses, which indicated that sophisticated and experienced businessmen like Lovelady and James understood quite well how they were able to buy termination services so cheaply. Although much of the evidence that Thrifty Call joined a conspiracy was circumstantial, the evidence provided ample support for the conclusion that Ward, E-Tex Data, and Thrifty Call "shared the general goal or object of the conspiracy" to terminate long distance calls on local lines and that "the essential nature and general scope of the plan was known" to them. See Final Jury Instruction No. 18. The same evidence supported the necessary mens rea element of the crimes under the Crime Victim statute.
C. Consistency of Verdict
Thrifty Call contends that the jury's answers to Questions 6 and 12 on the verdict form are irreconcilable. In Question 12, the jury found Thrifty Call liable for the wrongful acts of its agent, employee and co-conspirator, Lacy Ward, and for the wrongful acts of co-conspirators E-Tex Data, Ward Products, Danny Hodges, and Shane Gregg. Thrifty Call argues that these answers are inconsistent with the jury's answer to Question 6 regarding comparative fault. The jury attributed 75% fault to Thrifty Call and 25% to Ameritech Indiana. The jury did not attribute any fault to Lacy Ward, E-Tex Data, Ward Products, Danny Hodges, or Shane Gregg.
According to Thrifty Call, if none of these agents or co-conspirators were at fault for causing injury to plaintiff, then Thrifty Call cannot be liable under a theory of vicarious liability. Thrifty Call did not object to the alleged inconsistencies before the jury was discharged. Thus, its objection may be deemed waived under Strauss v. Stratojac Corp., 810 F.2d 679 (7th Cir. 1987). However, the application of the Strauss waiver in this case is unnecessary, since the jury's answers to Questions 6 and 12 can easily be reconciled.
A defendant's failure to object to alleged inconsistencies in answers to interrogatories under Fed.R.Civ.P. 49(b) prior to the jury's discharge may constitute waiver of the issue. Strauss v. Stratojac Corp., 810 F.2d 679 (7th Cir. 1987). Whether the verdict form used at trial is governed by Rule 49(a) or Rule 49(b) is critical for determining whether Thrifty Call preserved its right to challenge the alleged inconsistencies at this juncture. See Whitlock v. Jackson, 754 F. Supp. 1394 (S.D. Ind. 1991) (McKinney, J.) (discussing circuit split in application of Strauss waiver to Rule 49(a); rejecting waiver in absence of clear directive by Seventh Circuit, where instructions were most likely special verdicts under Rule 49(a)). The verdict form used in Thrifty Call's trial is governed by Rule 49(b). The verdict form asked the jury whether Ameritech Indiana and/or Ameritech Michigan proved its case that Thrifty Call committed fraud or committed a crime covered by the Crime Victim statute, and if so, what amount of damages were associated with each plaintiff's losses. This series of questions constitutes a general verdict. See Turyna v. Martam Construction Co., Inc., 83 F.3d 178, 181 (7th Cir. 1996) ("General verdicts simply ask the jury to answer the question `who won,' and if the winning party is entitled to a monetary award, to answer the question `how much.'"). The verdict form also instructed the jury to determine whether several entities or persons were employees, agents, or co-conspirators of Thrifty Call, and to assign comparative fault percentages to those entities or persons. These questions constitute special interrogatories. The main difference between a special verdict under Rule 49(a) and a general verdict with special interrogatories under Rule 49(b) is who (judge or jury) makes the ultimate legal conclusions. Under Rule 49(a) the jury answers factual questions for the benefit of the trial court which then applies the law to those answers. Under Rule 49(b) the jury, after being fully instructed, answers the interrogatories, renders a general verdict and the trial court enters judgment on the jury's verdict. See Bradway v. Gonzales, 26 F.3d 313, 317 (2d Cir. 1994); Robert E. Jones et al., Rutter Group Practice Guide Fed. Civ. Trials Ev. 18-A, p. 5-6 (2005).
Where there is a view of the case that makes the jury's answers to special interrogatories consistent, they must be resolved that way. Atlantic Gulf Stevedores, Inc. v. Ellerman Lines, Ltd., 369 U.S. 355, 364 (1962); Crossley v. General Motors Corp., 33 F.3d 818, 821 (7th Cir. 1994) ("Our duty is to attempt to reconcile an apparently inconsistent jury verdict, if doing so is possible.").
The jury was properly instructed that Thrifty Call was legally responsible for the actions of employees, agents, and co-conspirators. As a result, the allocation of fault percentages among those persons and entities was a moot question. Rather than try to sort out, for example, the relative fault of Lacy Ward and Danny Hodges, the jury acted consistently with its instructions and combined all of the co-conspirators' fault into one percentage for which Thrifty Call was legally responsible. See Final Instruction Nos. 15-16, 18. The jury also was instructed that knowledge of an officer, employee, or agent of Thrifty Call could be imputed to the corporation:
A corporation is legally responsible for the knowledge of that which its officers, employees, and agents actually knew. It is also legally responsible for knowing things that its officer, employees, and agents should have known if they had used ordinary care after receiving sufficient information to prompt a reasonable person to inquire further about the situation. If an officer, employee, or agent has knowledge of such facts as would lead an honest person, using ordinary caution, to make further inquiries, but he does not make the obvious inquiries, he must be taken to have notice of those facts which, if he had used ordinary diligence, would have been readily ascertained.
Final Instruction No. 17. The jury, therefore, had the option of attributing the fault of any non-party officer, employee, agent, or co-conspirator of Thrifty Call to Thrifty Call itself.
In Indian Trucking v. Harber, 752 N.E.2d 168 (Ind.App. 2001), plaintiffs' daughter was killed when she was a passenger in a car that collided with a truck. Plaintiffs sued the trucking company, the truck owner, the truck driver, and the driver of the car she had been in. The jury awarded the plaintiffs a total of $2 million in damages, assessing fault among the defendants as follows: Indian Trucking 50%, the truck owner 15%, the truck driver 15%, and the car's driver 20%. Indian Trucking, the truck owner, and the truck driver argued on appeal that the verdict forms submitted to the jury should have provided only one space for an aggregate percentage of fault to be assigned to them. The Indiana court disagreed:
[T]he trial court was required by statute to furnish a jury verdict form capable of showing the percentage of fault, if any, attributable to each defendant. . . . Moreover, the jury received an instruction informing them that, "Any act or omission of an officer, employee, or agent acting within the scope of his authority is considered in law to be the act of the corporation for which the corporation is responsible." Consequently, the jury was fully informed of the option to combine the fault of Defendant Appellants and attribute it fully to Indian Trucking, limited only by the verdict form's 100% maximum.752 N.E.2d at 176-77. As Indian Trucking illustrates, a jury may assign 100% of the fault to a corporate defendant even if its employees, agents, and co-conspirators were also at fault for committing wrongful acts. In this case, the jury essentially did itself what the court would have done if the jury had allocated fault among all individual co-conspirators.
Thrifty Call also contends that the jury's verdict against Ameritech Michigan in Question 1 is inconsistent with the jury's verdict in favor of Ameritech Indiana on punitive damages in Question 7. There is no inconsistency here. In Question 7, the jury assessed punitive damages against Ameritech Indiana. In Question 1, the jury found that Thrifty Call was not liable for fraud against Ameritech Michigan, and thus no damages against Ameritech Michigan were appropriate. The jury was not asked to decide whether Thrifty Call engaged in fraudulent conduct in general. It was asked to decide related claims asserted by two plaintiffs. The evidence of events in Michigan and Indiana was different. The jury could reasonably find liability in Indiana and not in Michigan.
D. Compensatory Damages
Thrifty Call contends that the compensatory damages awarded to Ameritech Indiana are excessive and conflict with the undisputed evidence. Thrifty Call specifically argues that (1) Ameritech Indiana developed at least six different damages estimates and presented three different calculations to the jury; (2) the damages expert testifying at trial did not know the source of the minutes of use factor in one of the calculations; (3) one damages calculation used data on attempted calls rather than completed calls; (4) one damages calculation used minutes of use based on call traffic not representative of the traffic within the relevant time frame; and (5) the calculations included tariff-based fees during a two-month period in 2000 when Ward Products did not transmit any Thrifty Call traffic.
The court may grant Thrifty Call a new trial based on the excessiveness of the jury's award only if the award is "monstrously excessive" or the award has no rational connection to the evidence, indicating that the award was "merely a product of the jury's fevered imaginings or personal vendettas." EEOC v. AIC Sec. Investigations, Ltd., 55 F.3d 1276, 1285 (7th Cir. 1995); accord, Kapelanski v. Johnson, 390 F.3d 525, 532 (7th Cir. 2004); DeBiasio v. Illinois Central Railroad, 52 F.3d 678, 687 (7th Cir. 1995). A remittitur rather than a new trial may be more appropriate when a party seeks to establish the need for a new trial based on the size of the verdict. See Davis v. Consolidated Rail Corp., 788 F.2d 1260, 1263 (7th Cir. 1986) ("Only in an unusual case will a court order a new trial on liability because of an error in assessing damages or in apportioning them among multiple defendants.").
Ameritech Indiana sought as damages for the fraud the amount of the applicable tariffs for terminating long distance telephone calls during the relevant time period, reduced by the amount of monthly charges that it collected from Thrifty Call's co-conspirators. Ameritech Indiana presented its damages claim through Sandra Douglas, an accountant who offered the jury three estimates of actual damages. Trial Exs. 112-114. Thrifty Call vigorously cross-examined Douglas and elicited the assumptions behind the calculations. The differences among the three estimates were based on different estimates of one factor: the total minutes of usage for the long distance calls that Thrifty Call terminated through Ameritech Indiana facilities by using the fraudulent scheme. It was necessary to estimate the minutes of usage because Thrifty Call had destroyed its own records before suit was filed, but at a time when it knew it had been engaged in a fraudulent conspiracy. Its complaints about the fact that Ameritech Indiana had to use estimates thus ring hollow.
The jury adopted the middle of the three estimates, to the penny. See Trial Ex. 113. For minutes of use, that middle estimate assumed the same call volume that was recorded on the same telephone circuits during July 2000, the month after Thrifty Call sold its assets to a different corporation whose billing records were still available and were obtained in discovery. The calls used to produce this middle estimate were completed calls.
The compensatory damages awarded to Ameritech Indiana had a rational connection to the evidence and were not excessive. The facts that the estimates were revised several times and that the data were uncertain do not invalidate the damages estimates presented. Also, the jury could rationally find that the damages to Ameritech Indiana included lost access rates during the months when Thrifty Call long distance traffic was terminated on ATT lines. Again, if Thrifty Call had not destroyed the relevant records of its gains from the fraud, its complaints about the difficulties in estimating the losses might deserve more consideration.
Upon discovering the true nature of Ward Products' business in March 2000, Ameritech Indiana terminated its contract with the company and disconnected the local lines. Lacy Ward and co-conspirators then obtained local replacement lines from ATT Local by falsely representing themselves to be agents of National Marketing, a catalog and telemarketing company that would be conducting local calls. The defendants again obtained a flat fee rate for these lines. Thrifty Call's calls were then terminated on National Marketing's local lines. Ameritech Indiana claimed it was also harmed by this arrangement because its customers were the primary recipients of these calls, so that Ameritech Indiana was entitled to a portion of the usage fees that ATT should have collected from National Marketing.
The jury was not restricted to the estimates put forth by Ameritech if it had found an estimate unreasonable. There is no evidence indicating that the middle damages estimate (Trial Ex. 113) upon which the jury relied was excessive, contrary to the undisputed evidence, or unreliable. E. Jury Instructions
To obtain a new trial based on erroneous jury instructions, Thrifty Call must show that the instructions did not adequately state Seventh Circuit or Indiana law and that Thrifty Call was prejudiced by the error because the jury was likely confused or misled. Susan Wakeen Doll Co., Inc. v. Ashton Drake Galleries, 272 F.3d 441, 452 (7th Cir. 2001). An erroneous jury instruction could not prejudice Thrifty Call unless "considering the instructions as a whole, along with all of the evidence and arguments, the jury was misinformed about the applicable law." Id.
Thrifty Call first contends that the court erroneously submitted inconsistent theories of liability to the jury. The court instructed the jury on both the remedy of punitive damages under common law and the remedy of treble damages under the Crime Victim statute. Under Indiana law, a plaintiff may not recover both remedies. Thrifty Call, relying on Osborne v. Wenger, 572 N.E.2d 1343 (Ind.App. 1991), argues that Ameritech was required to elect one of these remedies before the case was submitted to the jury. The Osborne court held that the trial court did not err in requiring the plaintiff to elect between punitive damages and statutory treble damages before the personal injury case went to the jury. Id. at 1346.
The holding in Osborne has been called into question by the Indiana Supreme Court's decision in Cahoon v. Cummings, 734 N.E.2d 535 (Ind. 2000), a decision addressed at trial, and which Thrifty Call failed to address in its motion. The defendants in Cahoon, relying in part on the holding in Osborne, asserted that the trial court erred by instructing the jury as to both wrongful death and survival actions because they were inconsistent and mutually exclusive theories of recovery. The trial court had instructed the jury that they could not award damages in both actions, but defendants argued this instruction was insufficient to cure the harm resulting from allowing the jury to hear evidence of pain and suffering under the survival claim, which could inflate the damage award on the wrongful death action. The Indiana Supreme Court disagreed and held that the plaintiff was not required to elect a remedy prior to trial. The Court reasoned that Indiana Trial Rule 8(E)(2) allows a party to plead alternative and even inconsistent theories of recovery, so that "it is not reversible error to proceed on alternative inconsistent theories under instructions that preclude recovery on both." Id. at 543.
Trial Rule 8(E)(2) was not considered by the Osborne court, perhaps because the rule was not yet in force at the time the complaint was filed. Id. at 543 n. 5.
The jury was properly instructed on verdict form Questions 9 and 10 that Ameritech would be awarded only one of the remedies to avoid double recovery. There is no indication that the jury's awards under either remedy were influenced by its consideration of the other remedy. The court required that Ameritech Indiana select one of the alternative remedies after trial. The court's actions are consistent with Indiana law.
Thrifty Call also contends that the court erroneously failed to apply Indiana's Comparative Fault Act to plaintiff's Crime Victim claim. The Crime Victim statute is largely a penal measure. Recoveries under the statute are similar to punitive damages because "they are not compensatory and are designed to deter the conduct which resulted in the damages complained of." Blankenship v. McKay, 534 N.E.2d 243, 244 (Ind.App. 1989). Indiana's Comparative Fault Act, in contrast, applies to compensatory damages. See Ind. Code § 34-51-2-5 ("In an action based on fault, any contributory fault chargeable to the claimant diminishes proportionately the amount awarded as compensatory damages for an injury attributable to the claimant's contributory fault . . .") (emphasis added). Thus, application of the Act to damages that fall within the scope of "punitive damages" appears to be inconsistent with Indiana's statutory scheme.
Thrifty Call argues that the Comparative Fault Act contemplates application to civil actions by crime victims, by allowing a plaintiff to recover 100% of compensatory damages in a civil action for an intentional tort from a defendant who was convicted after a prosecution based on the same evidence. Ind. Code § 34-51-2-10. Before Thrifty Call's trial, Lacy Ward and others pled guilty to conspiring to commit wire fraud. United States v. Ward, et al., No. IP 01-79-CR (S.D. Ind.). Section 34-51-2-10 modifies comparative fault based on a defendant's level of fault in favor of the plaintiff by giving the plaintiff a choice among defendants from whom to recover. However, § 34-51-2-10 does not allow the defendant to shift fault to the plaintiff/crime victim or to co-defendants or non-parties. The court concludes that the instructions presented to the jury correctly stated Indiana law. If the Seventh Circuit or the Indiana courts find that the Comparative Fault Act should apply to recovery under the Crime Victims Act, the verdict form was structured here so that the problem could be remedied with a simple arithmetic calculation.
F. Prejudgment Interest
Thrifty Call argues that, if the court does not grant a new trial, the court should remove or reduce the award of prejudgment interest. Ameritech Indiana sought prejudgment interest on the compensatory damages awarded by the jury, at the rate of 8 percent simple interest for the period from July 7, 2000 to January 7, 2005, the Friday before trial began. The 8 percent rate is the default statutory rate under Indiana law. Ind. Code § 24-4.6-1-102. Under these terms, prejudgment interest amounted to $1,126,376.60. Thrifty Call contended at that time that Ameritech Indiana was not entitled to prejudgment interest at all because the compensatory damages were not ascertainable until trial, and that even if Ameritech Indiana was entitled to prejudgment interest, interest should not accrue before Ameritech filed suit on January 28, 2002. The court has previously explained why Ameritech Indiana was entitled to prejudgment interest in the requested amount and for the requested dates. Indiana Bell Telephone Co. v. Thrifty Call, Inc., 2005 WL 552260 (S.D. Ind. Feb. 11, 2005). Thrifty Call has added nothing new to the discussion, and its renewed request is denied.
Conclusion
Thrifty Call's renewed motion for judgment as a matter of law under Rule 50(b) and its motion for a new trial under Rule 59(a) are both denied.So ordered.