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Pensacola Motor Sales, Inc. v. Daphne Automotive, LLC
Citations: 155 So. 3d 930; 2013 WL 6360967Docket: 1110840 and 1110857
Court: Supreme Court of Alabama; December 5, 2013; Alabama; State Supreme Court
In consolidated appeals, Pensacola Motor Sales, Inc. (BTT) and its employee Fred Keener contest jury verdicts favoring Daphne Automotive, LLC (EST) and owner Shawn Esfahani for slander claims. The case stems from a competitive rivalry between BTT and EST, established by Esfahani in December 2007. Tensions escalated following a failed bid by BTT's owner, Bob Tyler, for a new dealership in Baldwin County and a previous federal litigation regarding alleged cybersquatting, which EST won. Esfahani and EST claimed damages due to slanderous statements made by BTT employees, aimed at dissuading customers from purchasing from EST. Allegations included assertions that Esfahani and EST were involved in illegal activities and supported terrorism, with derogatory references to "Middle Eastern Shore Toyota" and "Taliban Toyota." In January 2010, they filed suit in Mobile Circuit Court for slander per se, slander per quod, and intentional interference with business relationships, asserting loss of public confidence, damaged reputation, and lost profits. At trial, evidence demonstrated a pattern of defamatory statements from BTT employees. Testimonies included accounts from Pastor Michael Bonham, who recounted multiple instances where BTT salesman Joe Carp accused Esfahani of funding terrorism and making derogatory remarks about his heritage. The continuous defamatory comments led to significant reputational harm for Esfahani and EST, supporting their claims for damages. Keener attempted to dissuade the Bonhams from visiting EST by questioning their patriotism and expressing concerns about their shopping choices. Despite initial reservations, the Bonhams visited EST and decided to purchase a car. During the purchase process, Carp contacted the Bonhams and accused them of funding terrorism through their decision to buy from EST, which prompted Pastor Bonham to report this to EST management. Following multiple reports of slanderous statements made by BTT salesmen, including from the Bonhams, EST sent a cease and desist letter to BTT on July 31, 2009, specifically addressing Carp's remarks and demanding a retraction. BTT's attorney responded on August 24, 2009, acknowledging an inappropriate remark and indicating disciplinary action against Carp, which amounted to a warning of termination for future slanderous comments. Esfahani filed a lawsuit in January 2010 due to ongoing slanderous statements from BTT and Keener, despite the cease and desist letter. Additional testimony indicated that BTT may have intensified its disparagement of EST, with a BTT salesman making derogatory comments to a customer planning to visit EST. Former BTT employee Patricia Gibson revealed that BTT salespeople routinely referred to EST as "Taliban Toyota" and made similar defamatory claims during sales meetings. Testimony from Josh Wilson, a longtime BTT salesman, confirmed the frequent use of derogatory terms by Keener and other sales staff to discourage customers from visiting EST. Following this testimony, Wilson was terminated. BTT's owner and general manager acknowledged that Keener was responsible for customer interactions and training salespeople on what to say, confirming a practice of directing salesmen's comments to customers. Every customer visiting BTT's dealership from 2008 until at least March 2010 was exposed to slanderous claims from Keener or salesmen implying that Esfahani and EST were involved in terrorism against the U.S. An economist, Dr. Ernest H. Manuel, Jr., testified that these defamatory statements resulted in approximately $7.1 million in lost sales for EST, a figure Esfahani deemed conservative. After a four-day trial, the jury awarded Esfahani $1.25 million in compensatory and $2 million in punitive damages for slander per se, and EST received $1.25 million in compensatory and $3 million in punitive damages for both slander per se and per quod claims against BTT and Keener. Following post-judgment motions from BTT and Keener for a new trial or modification of the judgment, the trial court denied these motions. On appeal, BTT and Keener argue that the trial court made evidentiary errors leading to excessive jury awards and seek remittitur based on legal precedents. The standard for appraising the trial court's evidentiary rulings emphasizes judicial discretion and requires proof that any errors materially affected the parties' rights. Additionally, Keener claims the court improperly excluded evidence from prior federal litigation regarding "cybersquatting," arguing it was relevant to the case despite the trial court's reasoning that it would cause undue delays and was therefore inadmissible under relevant evidentiary rules. Keener argues that the exclusion of evidence related to a cybersquatting lawsuit constituted an error under Rules 401 and 402 of the Alabama Rules of Evidence, which permit the admission of relevant evidence. He claims this evidence was pertinent to motivations behind the litigation filed by EST and Esfahani and was material for his defense against their slander claims. Keener also contends that this evidence would help jurors understand the competitive dynamics of the automobile sales industry. However, EST and Esfahani assert that Keener failed to preserve this issue for appellate review, as he did not attempt to introduce the evidence during the trial after a pretrial motion in limine was granted to exclude references to prior federal litigation. According to established case law, failure to seek admission of the contested evidence at trial precludes appellate review. Additionally, BTT and Keener claim the trial court erroneously allowed hearsay testimony, which is defined as statements not made by a declarant during trial, offered to prove the truth of the matter asserted. They specifically cite testimony from Esfahani regarding multiple layers of hearsay involving unnamed EST employees and BTT customers making slanderous statements about EST and Esfahani. BTT and Keener challenge the trial court's classification of this testimony as non-hearsay, arguing that it was indeed offered to prove the truth of the slanderous assertions. However, they do not provide substantial legal authority to support their claims beyond referencing a single case, Armstrong v. HRB Royalty, Inc., without adequately relating its facts to their situation or pinpointing relevant portions of that decision. BTT and Keener did not address whether the statements they challenged were exceptions to the hearsay rule. The trial court found that the disputed testimony was cumulative of other uncontested witness testimonies regarding slanderous statements made by BTT and Keener, leading to the conclusion that any error in admitting the testimony did not impact the trial's outcome. Notably, BTT's owner acknowledged that the statements were made by employees, asserting that they were not harmful due to their lack of credibility. Consequently, BTT and Keener failed to prove that the trial court abused its discretion in admitting the testimony or that any error likely affected their substantial rights. Additionally, BTT and Keener argued that the trial court wrongfully excluded Esfahani's personal tax returns and evidence of his personal financial losses, claiming this hindered their defense against Esfahani's damage claims. They cited relevance under Alabama Rules of Evidence 401 and 402. However, Esfahani contended that his personal tax returns were ultimately admitted through a disk containing evidence reviewed by the damages expert. Since BTT and Keener did not dispute this, their argument regarding the exclusion of those documents was deemed without merit. The court also found no relevance in Esfahani's personal financial situation or that of a separate business, as there was no indication that EST was improperly formed or that Esfahani sought damages related to his Hyundai dealership. Overall, the court upheld the trial court's decisions on evidence admissibility and relevance. BTT and Keener challenge the trial court's admission of testimony from Dr. Ernest Manuel, a damages expert for Esfahani and EST, claiming it was based on inadmissible facts and that Manuel's testimony should have been excluded due to a failure to timely supplement his initial report. The court record indicates BTT and Keener sought to exclude Manuel's testimony on multiple grounds, including the late submission of a 62-page supplemental report and requested a re-deposition, which the court permitted but ultimately denied the exclusion motion. During the trial, BTT objected to Manuel's testimony, asserting it was based on information not admitted into evidence. The court, referencing Rule 703 of the Alabama Rules of Evidence, dismissed these objections, allowing BTT to challenge the basis of Manuel's opinions during cross-examination. A disk containing all information relied upon by Manuel was entered into evidence by mutual agreement. On appeal, BTT and Keener argue that certain relied-upon facts were inadmissible, contending that Rule 703 does not change the requirement that information relied upon by experts must be in evidence, citing Alabama law. The Advisory Committee Notes to Rule 703 affirm that while an expert can consider information outside personal knowledge, it generally must be admitted into evidence, although exceptions exist for certain types of information. BTT and Keener challenge the admissibility of data relied upon by Manuel in his testimony, arguing that it included studies on dealer reactions, a damages model, registration data, industry growth projections, and discount rates, none of which were admitted as evidence. They do not clarify whether the disk that contained "all" of Manuel's data was entered into evidence or if Manuel's testimony qualified under Rule 703 exceptions. They assert that the absence of this data prejudiced their case, but fail to show how this omission affected their substantial rights, as required for reversible error. They also contest the inclusion of “the Auto Pacific Projections,” claiming it was improperly admitted and represented opinion testimony from an unqualified expert, yet provide no evidence to substantiate their claims about its reliability or admissibility. Furthermore, they do not address the argument that the projections were merely cumulative of other evidence presented. On the issue of sanctions for discovery violations, BTT and Keener argue the trial court erred by not excluding Manuel's testimony. However, they acknowledge that Rule 26(e) does not specify sanctions for failure to supplement discovery and that sanctions are typically imposed sparingly, leaving discretion to the trial court. Overall, BTT and Keener's arguments lack sufficient legal foundation to demonstrate an abuse of discretion by the trial court. BTT and Keener have not provided sufficient evidence to demonstrate that the trial court's decision, which denied their request for exclusion but allowed re-deposition of Manuel regarding late-supplied information, was beyond its discretion. They reference a federal four-factor test for evaluating sanctions under Rule 26 but fail to apply it to their situation, only mentioning when they learned of the withheld information and alleging willfulness in the failure to supplement. The trial court previously dismissed BTT and Keener's arguments against Manuel's testimony, noting they presented no new evidence and did not utilize their retained expert to contest Manuel's methodology or damage calculations. They also chose not to request a special verdict, resulting in a general verdict for EST on slander claims without specific damage assessment. The court declined to speculate on how the jury allocated damages, emphasizing that sufficient evidence supported the verdict regardless of any issues with Dr. Manuel's opinion. Regarding damages, BTT and Keener argue that the case raises a novel question about the necessary proof for substantial damages in slander actions. However, established law indicates that damages are implied for slander per se, relieving the plaintiff from proving actual reputational harm to recover damages. BTT and Keener challenge the sufficiency of evidence presented by Esfahani, which aimed to demonstrate reputational damage and mental anguish. They cite cases concerning evidence quality for actual damages, which are not relevant here since they do not involve slander per se findings. The court reiterated that for slander per se, injury to reputation is legally inferred, and actual harm does not need to be proven. The defendants argued that the jury's compensatory-damages award lacked evidentiary support. However, it was emphasized that the jury's decision was not solely based on the plaintiff's testimony regarding mental anguish. The evidence presented by the plaintiff concerning his suffering was deemed sufficient to uphold the award, even if it was primarily for mental anguish. The jury found in favor of Esfahani and EST against BTT and Keener on the slander per se claim. The trial court noted that BTT and Keener's claims regarding the excessive nature of the damages were based on incorrect assumptions, specifically that the compensatory damages relied entirely on the plaintiff's mental anguish and that he was required to prove such damages to recover. It was clarified that damages presumed to arise from defamation per se include both loss of reputation and mental anguish, with the latter not needing proof due to its inherent nature in such cases. Esfahani's testimony highlighted his fear for his safety and his family's security after being wrongfully associated with terrorism, further compounded by his history as a teenage refugee from Iran. He indicated that these fears nearly led him to relocate his family. Esfahani estimated his reputational damages at over $7.2 million. The document also addressed challenges by BTT and Keener regarding the compensatory damages awarded to EST, arguing they were excessive and speculative due to a lack of evidence on actual reputation damage. However, the testimony presented was held to be properly admitted during the trial, countering their claims. EST incurred $7.1 million in damages, supporting the jury's award of $1,250,000 in compensatory damages for slander per se and per quod claims, which was notably less than the lost profits testified by Manuel. The trial court observed that the majority of this award was not tied to the slander per quod claim, as EST demonstrated the same slander per se arguments as Esfahani. Thus, the reputational damage warranted a compensatory award equal to that of Esfahani, both presumed and evidenced. Regarding lost profits, Alabama law requires that such losses be a natural and proximate result of the alleged breach and quantifiable with reasonable certainty, as established in Paris v. Buckner Feed Mill, Inc. and supported by Supreme Court precedent. The Morgan case affirmed that jury verdicts for lost profits are valid if there is a basis for the jury to calculate them with reasonable certainty. Despite rigorous cross-examination of Manuel's calculations by BTT and Keener, they did not successfully challenge his expertise or the reasonableness of his estimations regarding EST's lost business due to their slander. BTT and Keener also argued for remittitur of the punitive damages awarded to Esfahani and EST, citing excessiveness. They referenced the guideposts from BMW of North America, Inc. v. Gore and factors from Hammond v. City of Gadsden and Green Oil Co. v. Hornsby, which evaluate the defendant's misconduct's reprehensibility, the disparity between harm and punitive awards, and the comparison with civil penalties in similar cases. The trial court evaluated evidence from BTT and Keener related to the Gore guideposts and Hammond-Green Oil factors to assess the appropriateness of punitive damages. The court found that each factor weighed against excessiveness and justified the jury's punitive damages award. The defendants' slanderous behavior was deemed severely reprehensible under Alabama law, warranting high blameworthiness and culpability. The jury's verdict was supported by a genuine intent to punish and deter the defendants, rather than being influenced by bias or prejudice. The punitive damages were considered appropriate and reasonable, aimed at highlighting the reprehensibility of the defendants' conduct and discouraging similar future actions. BTT and Keener contested the economic impact of their statements, arguing that the claimed $7 million loss by EST was speculative; however, the record contradicted this assertion. The trial court's decisions regarding the punitive damages and application of relevant factors are subject to de novo review, with no presumption of correctness, as established in previous Alabama case law. Evidence indicated a negative economic impact on EST’s sales, which BTT and Keener failed to demonstrate supported their request for remittitur. They contended that the 2:1 ratio of punitive to compensatory damages warranted remittitur but cited no relevant Alabama case law to substantiate their claim. The argument that the compensatory award contained punitive damages elements lacked supporting authority, and BTT and Keener did not pursue the disparity argument they mentioned. The U.S. Supreme Court has stated that the ratio of punitive to compensatory damages should reasonably relate to the actual harm inflicted, rejecting the idea that a strict mathematical formula defines excessiveness. In this case, the punitive damages were exactly double the compensatory amount and lower than EST’s claimed damages. BTT and Keener failed to provide authority demonstrating that the punitive award was disproportionate. The Court of Civil Appeals has upheld significant punitive damages when evidence of a defendant's pattern of behavior exists, suggesting the ratio of damages was reasonable. Lastly, BTT and Keener's assertion that they were not guilty of similar past conduct was contradicted by the trial court's findings. Evidence shows that BTT’s defamatory actions were systematic, constituting company policy rather than isolated incidents by rogue employees. Testimony from current and former BTT employees indicates that slanderous statements against EST were ongoing, even post-lawsuit. Repeated misconduct is viewed as more serious than single instances of wrongdoing. BTT and Keener's argument for remittitur, based on a precedent case (Johnson), is unsubstantiated; they fail to address key factors that informed the Johnson court's decision to remit punitive damages. BTT claimed they acted upon receiving a limited complaint about slanderous statements before litigation began, asserting they took appropriate steps to remedy the situation. However, the trial court found no evidence of corrective action taken by BTT after the jury's verdict, highlighting their focus on general employee issues rather than addressing the specific defamation. Notably, BTT lacks a written policy against making defamatory statements about competitors, and their representative admitted to not recalling any changes made post-verdict. This inaction indicates a disregard for their wrongdoing and a likelihood of repeated offenses. The trial court's assessment of BTT's refusal to retract statements or take corrective measures further supports the conclusion of reprehensible behavior, as noted in previous case law. BTT employees were reportedly instructed to avoid making slanderous statements, yet evidence indicates that such statements persisted without further investigation or consequences from BTT. Tyler's pre-trial testimony confirmed the occurrence of these slanderous statements, which were consistent with Esfahani and EST's allegations, yet neither Keener nor BTT issued a retraction. This lack of response suggests that the jury's punitive damages should not be reduced. BTT and Keener contended that a cease-and-desist letter from July 2009 was their sole opportunity to address the alleged wrongdoing, but the evidence indicates that slanderous conduct had been ongoing. Notably, the cease-and-desist letter was received just six months before the underlying litigation commenced in January 2010, and slanderous statements continued even after BTT acknowledged the validity of the allegations. The trial court emphasized that the degree of reprehensibility is the critical factor in assessing punitive damages. BTT and Keener attempted to mitigate their conduct’s perceived severity by comparing it to other cases and arguing that Esfahani and EST lacked financial vulnerability; however, the trial court disagreed. It applied criteria from previous cases, including the type of harm (economic versus physical), the defendants' awareness of their actions, the financial vulnerability of the plaintiffs, the frequency of the conduct, the duration of the conduct, and whether the harm stemmed from intentional malice or deceit. The trial court's analysis highlighted that harm to reputation, once inflicted, is particularly challenging to rectify, referencing case law that underscores the enduring damage of slander. This reinforces the notion that mere opportunities for rebuttal cannot adequately restore a damaged reputation. The law of defamation emphasizes the challenge of countering falsehoods with truth, as illustrated in *Lawnwood Med. Ctr. Inc. v. Sadow*. The jury could perceive defamatory statements as widely dispersed and damaging, akin to feathers blown away, making their effects difficult to trace. The court noted that the defendants, familiar with the competitive landscape, had a clear understanding of the risks their false statements posed. Specifically, BTT and Keener engaged in a deliberate smear campaign against Esfahani and EST, accusing them of severe crimes such as treason and terrorism, which were particularly damaging given Esfahani's Iranian heritage and the sensitive context of the vehicle market. The court acknowledged that while the plaintiffs' financial vulnerability was not a primary consideration, it highlighted the distinct reputational harm that targeted defamatory claims can inflict, especially on a businessman of Iranian descent. The evidence indicated that BTT's defamatory actions were systematic rather than isolated incidents, supported by testimony from employees confirming that such conduct was part of company policy. Additionally, the duration of the defamatory behavior spanned at least two years, marking a sustained attack on the plaintiffs' reputation. The court found indications of intentional wrongdoing, supported by inconsistencies and evasions in the testimonies of BTT's representatives, suggesting a deliberate concealment of harmful actions. Although BTT and Keener claimed the defamatory statements were isolated, the evidence pointed to a broader pattern, with the potential for many more victims of their slanderous remarks beyond those directly identified by the plaintiffs. Alabama law establishes a presumption of damage in per se defamation cases, recognizing the difficulty of proving pecuniary injury from slander. The trial court emphasized the reprehensible nature of the remarks in the current political climate, which supports the jury's punitive-damages award. BTT and Keener argue that punitive damages should eliminate any profits from their wrongful actions, claiming no evidence suggests they profited from slanderous statements against Esfahani and EST. However, the trial court found sufficient inference of intent to profit from their misconduct, citing a precedent where similar actions were deemed profitable for the defendant. BTT and Keener did not provide evidence to contest this finding. Regarding their financial situations, neither BTT nor Keener argued that the punitive-damages award's impact on their finances justified a reduction. They also claimed the punitive damages were excessive compared to potential criminal sanctions they could have faced, relying on a previously declared unconstitutional statute. However, there is no evidence that either has faced criminal sanctions for similar conduct, negating grounds for remittitur. Keener's assertion that the absence of prior civil actions against him warrants a reduction was also dismissed, as the lack of such actions does not necessitate a remittitur. BTT and Keener's arguments for reducing the jury's punitive damages awards are unsubstantiated, as only one factor—the absence of financial vulnerability—supports their claim. The analysis strongly favors upholding the jury’s awards, leading to the trial court's correct denial of BTT and Keener's request for a new trial and refusal to remit the damages. The judgment of the trial court is affirmed. Carp was terminated by BTT prior to the filing of the complaint. At trial, Esfahani and EST withdrew their claim of intentional interference with business relations, and the slander per quod claim was dismissed concerning Esfahani. The jury considered the slander per se claims from both plaintiffs. Although BTT and Keener submitted separate appeals, their briefs were largely similar. The relevance of the evidence challenged by Keener is questioned, especially since EST and Esfahani succeeded in a related federal action. The excerpt references various Alabama evidentiary rules and case law regarding the admissibility of evidence, credibility of witnesses, and appropriate jury determinations on damages. Testimony indicated that the slanderous statements attributed to Keener were not isolated incidents, contradicting his claims. The trial court noted significant inconsistencies in testimony from Keener and Tyler, emphasizing that credibility assessments are the jury's responsibility.