United International Holdings, Inc., a Delaware Corporation and Uih Asia Investment Company, a Colorado General Partnership v. The Wharf (Holdings) Limited, a Hong Kong Company Wharf Communications Investments Limited, a Hong Kong Company Wharf Cable Limited, a Hong Kong Company and Stephen Ng, a Hong Kong Citizen, Product Liability Advisory Council, Inc., Amicus Curiae

Citation: 210 F.3d 1207Docket: 98-1002

Court: Court of Appeals for the Tenth Circuit; April 28, 2000; Federal Appellate Court

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United International Holdings, Inc. (UIH), along with UIH Asia Investment Company, filed a lawsuit against The Wharf (Holdings) Limited, its managing director Stephen Ng, and related entities following a jury trial that awarded UIH $67 million in compensatory damages and $58.5 million in punitive damages. The case originated when UIH claimed it held an option to acquire 10% of the stock of Cable Network Communications Limited (CNCL) but was barred from exercising this option. UIH's claims were based on violations of Section 10(b) of the Securities Exchange Act of 1934, the Colorado Securities Act, and Colorado common law. The district court also awarded $28,208,440 in prejudgment interest and imposed sanctions on Wharf for contempt of court due to noncompliance with a turnover order, totaling $944,233.10, along with post-judgment attorney fees of $144,457.91 awarded to UIH. The case arose from Wharf's attempt to secure an exclusive cable television license in Hong Kong, which involved engaging NYNEX Network Systems Company for its expertise in the cable industry. The appeal by Wharf was ultimately affirmed by the Tenth Circuit Court.

In early 1991, Mark Schneider, vice president of UIH, met with Ng regarding a potential investment in Wharf's cable project in Hong Kong. UIH, based in Denver, expressed interest in investing in CNCL if Wharf secured the necessary license, rejecting a consulting role for a fee. Ng later communicated to UIH's William Hudon a desire for co-investment and noted restrictions on foreign ownership in Hong Kong. By October 1991, Schneider signed a confidentiality agreement to protect Wharf’s proprietary information.

In June 1992, during a meeting in Singapore, Ng informed Schneider that Wharf had chosen UIH as its cable partner and mentioned ongoing negotiations with NYNEX for a telephone partnership, though he did not indicate NYNEX's involvement was essential for a deal. Schneider noted an offer for a 10% ownership stake in CNCL, which he reported to UIH's board.

Starting in August 1992, UIH employees began assisting Wharf with the cable proposal and related tasks, while Hudon explored funding sources for UIH's potential investment. UIH and Wharf drafted letters of intent and shareholder agreements, with the initial letter outlining their intention to collaborate on the cable network but clarifying that it was not legally binding. It emphasized the need for a formal shareholders' agreement to be negotiated in good faith by September 25, 1992. UIH's Hong Kong counsel advised that executing the agreement should be contingent upon several conditions, including approval of financial plans and NYNEX's subscription of 20% of Wharf Cable. Ultimately, the parties did not sign a letter of intent.

In September 1992, Schneider visited Hong Kong during Wharf's bid preparations, where Ng expressed concerns about NYNEX potentially withdrawing support, jeopardizing Wharf's chances, and highlighted UIH's weak balance sheet as a detriment to the bid. Schneider proposed discussing UIH's financial situation with Wharf's board and questioned Ng's authority to negotiate on Wharf's behalf. At trial, Schneider stated that Ng had the authority to offer UIH a 10% investment right, but no agreement was reached before the license application deadline.

As the bid deadline approached, Wharf grew anxious about the absence of a signed letter of intent or shareholders' agreement, as well as the perceived weaknesses in its proposal. To mitigate these concerns, Wharf entered into separate Technical Cooperation Agreements with NYNEX and UIH on September 25, 1992. The UIH agreement stipulated that UIH would not act until Wharf secured the license and outlined UIH's role as an independent contractor without any ownership rights or claims related to the CATV system. The agreement mandated that any modifications or additional agreements must be in writing, disallowing oral agreements.

Michael Fries, UIH's senior vice president, signed the Technical Cooperation Agreement, which was the only formal agreement between the parties. Fries later removed a clause that would have invalidated prior commitments related to the agreement, indicating that it was intended primarily to support Wharf's bid. He asserted that Emil Fung from Wharf promised that the bid would explicitly state UIH's investment rights, which was corroborated by a draft bid presented at trial indicating that Wharf would offer NYNEX and UIH options to purchase up to 30% of shares in CNCL. Schneider authorized the signing of the Technical Cooperation Agreement after reviewing this draft, and Fung testified that UIH representatives were shown the final license application prior to submission without objection.

On September 30, 1992, Wharf submitted a license application under the premise of initial sole ownership and control by The Wharf (Holdings) Limited, supported by technical partners NYNEX Network Systems and United International Holdings, Inc. The bid indicated that if successful, Wharf would consider inviting NYNEX, UIH, and other strategic partners to acquire up to 40% of CNCL shares. Concerns arose from UIH officials regarding the vague language in the bid, prompting a meeting on October 8, 1992, where Ng allegedly requested UIH to provide high-level employees until Wharf could hire permanent staff, contingent on UIH's firm investment rights in CNCL. Ng reportedly agreed to grant UIH a 10% option to invest in CNCL, with specific terms regarding the purchase price and conditions for exercising the option, although this agreement was not formalized in writing, and Ng later denied offering the option.

Following this, Wharf and UIH exchanged several drafts of proposed shareholders' agreements, all of which included a clause nullifying prior commitments and agreements, but none were signed due to unresolved issues. In late December 1992, NYNEX indicated difficulties regarding its investment, leading Ng to suggest deferring ownership discussions. UIH expressed interest in a stake in the venture around 25%, contingent on NYNEX's non-participation, but Ng recommended postponing ownership discussions until after the service launch.

On April 21, 1993, UIH submitted a Form S-1 Registration Statement to the Securities and Exchange Commission, outlining its current and prospective investments. The statement indicated that upon Wharf being awarded a franchise, UIH would acquire a minimum of 10% equity in Wharf Cable, with Wharf Holdings retaining the remainder. Despite ongoing discussions throughout spring 1993, UIH and Wharf could not formalize an agreement, leading Fries to propose a "Memorandum of Understanding" outlining conditions for UIH's potential acquisition of CNCL shares, initially suggesting up to 20% but later finalizing at 10%. No version of this Memorandum was ever signed. 

On May 27, 1993, the Hong Kong Broadcasting Authority granted the franchise license to Wharf, effective June 1, 1993. Subsequently, UIH raised approximately $66 million for its investment in CNCL and indicated readiness to exercise its option by late July or early August. Internal discussions at Wharf revealed mixed feelings about UIH's investment. Fung recommended a structured 10% investment, acknowledging UIH's early contributions to Wharf Cable. However, by early September, Ng communicated to Fung that the Wharf board was more interested in finding a telecom partner than finalizing a deal with UIH. 

Further correspondence in September and October indicated increasing uncertainty about the deal, with Schneider emphasizing that their initial agreement involved UIH as a 10-20% investor in the project. Ng reminded Schneider that board approval was necessary and that the focus had shifted to launching the station. On October 31, Schneider and Fries traveled to Hong Kong for the station launch, where they reiterated UIH's contributions and investment rights to Wharf's board chairman, who appeared surprised, and Ng suggested patience in pursuing the matter.

On November 5, 1993, UIH submitted a memorandum of understanding to Wharf, indicating that its investment in CNCL was contingent upon approval from UIH's and WCIL's boards. Schneider communicated UIH's intent to invest at least 10% in the Wharf Cable project, a plan reaffirmed during their ongoing discussions. An early November S-1 statement from UIH noted its pursuit of a 10% interest in Wharf Cable, with negotiations expected to finalize within the first quarter of 1994, although success was not guaranteed. Internal Wharf communications revealed concerns about UIH's representations regarding the investment opportunity, suggesting a strategic retreat from acknowledging UIH's potential stake and focusing instead on a Technical Cooperation Agreement (TCA). On December 1, 1993, Ng informed Schneider that the Wharf board was split on UIH's involvement. Ng encouraged UIH to activate the TCA while avoiding commitments related to a potential investment. Schneider expressed willingness to accept TCA payments, provided it did not undermine UIH's expectations of investing. Internal notes indicated a strategy of stalling discussions about a partnership with UIH. After a March 18, 1994, meeting where Schneider reiterated UIH's desire to invest, he was informed that the board was not ready to entertain the investment. In November 1994, UIH filed a lawsuit claiming it had rendered essential services that enabled Wharf to secure a cable license and develop the system, arguing that there was a mutual understanding of a 10% investment option. UIH alleged that Wharf misled it regarding this option and sought relief for multiple claims, including securities violations, breach of contract, fraud, and negligent misrepresentation, along with demands for compensatory and punitive damages.

Wharf denied all allegations made by UIH, asserting that UIH was aware from initial negotiations that any agreement required a telephone partner, such as NYNEX, and claimed that no joint venture existed. Wharf cited documentary evidence to support its position that it intended not to be bound by anything other than a written agreement, and maintained that any deal required approval from each party's board of directors.

On appeal, Wharf argued that UIH failed to present a valid federal claim, warranting dismissal of both the Rule 10b-5 claim and the associated state claims. The court reviewed this jurisdictional issue de novo. UIH claimed subject matter jurisdiction based on federal securities fraud allegations under section 10(b) of the Securities Exchange Act and SEC Rule 10b-5, as well as supplemental jurisdiction over state law claims.

Wharf's argument implied that if the federal claim was dismissed, the state claims must also be dismissed; however, the court clarified that this is not the established rule. A federal court retains jurisdiction over state claims if the federal claim was initially substantial enough to confer jurisdiction, even if later dismissed. The court emphasized that a federal claim is insubstantial only if it is clearly without merit or frivolous.

Once federal jurisdiction is established, the trial court may exercise supplemental jurisdiction over related state claims. The court affirmed that they would uphold the district court's jurisdiction if UIH's complaint contained a substantial and nonfrivolous 10b-5 claim. Lastly, it reiterated that section 10(b) prohibits manipulative or deceptive practices in the sale or purchase of securities.

Section 10(b) of the Securities Exchange Act prohibits fraudulent activities related to the purchase or sale of securities, as outlined in Rule 10b-5. This rule makes it unlawful to: (a) use deceptive devices to defraud; (b) make untrue statements or omit necessary material facts; or (c) engage in practices that operate as fraud or deceit. To establish a viable claim under 10b-5, a plaintiff must demonstrate that (1) the defendant made a false statement or omitted a material fact; (2) the misrepresentation occurred in connection with a security transaction; (3) the defendant acted with scienter; and (4) the plaintiff relied on the misrepresentation, resulting in damages.

In addressing Wharf's jurisdictional challenge, the court examined UIH's complaint, confirming that the alleged security in question is the option to acquire CNCL stock, which UIH claims was sold to them as part of their agreement with Wharf. The court noted that Wharf did not dispute this classification on appeal. UIH contends that they purchased the option on October 8, 1992, as part of Wharf's offer for assistance in a cable television bid. The complaint alleges that Wharf made significant misrepresentations regarding the option, claiming they were false at the time and made with knowledge of their falsity or with reckless disregard for the truth. These misrepresentations were intended to influence UIH's investment decision, thereby satisfying the "in connection with" requirement of the 10b-5 claim.

UIH's 10b-5 claim against Wharf is characterized as involving allegations of misrepresentation regarding Wharf's intent to sell UIH securities or disputes over stock purchase rights, which Wharf contends fall outside federal securities law. Wharf cites the Supreme Court case Blue Chip Stamps v. Manor Drug Stores, asserting only actual purchasers or sellers of securities have standing for a private 10b-5 action. However, UIH qualifies as an actual purchaser as it acquired an option from Wharf on October 8, 1992. The court clarifies that Blue Chip does not limit UIH's claim, noting that holders of options and similar rights are recognized as "purchasers" under the 1934 Act. 

The court also rejects Wharf's claim that misrepresentations about intent to sell or disputes over purchase rights are outside Rule 10b-5's scope, citing that fraud in securities transactions includes entering contracts with undisclosed reservations to perform. The court distinguishes cases cited by Wharf, stating that they primarily involved breach of contract rather than misrepresentation of options or securities, and emphasizes that misrepresentations must relate to the securities at issue. In contrast, in Gurwara v. LyphoMed, the court found the claims were not about the option itself but about the stock, rendering it irrelevant to UIH's situation. Thus, the court concludes that UIH's claims are valid under Rule 10b-5.

A district court gains subject matter jurisdiction if a party presents a substantial, nonfrivolous federal claim, allowing it to exercise supplemental jurisdiction over related state law claims. This jurisdiction remains intact even if the federal claim is subsequently dismissed. In this case, UIH's allegations under Rule 10b-5 are deemed nonfrivolous and sufficient to state a claim. Wharf contends that the relationship between itself and UIH is governed by Hong Kong law, which it argues precludes the application of federal securities laws and thus federal jurisdiction. However, the court rejects this argument, clarifying that forum selection and choice of law issues do not affect subject matter jurisdiction, but rather concern venue or sufficiency of the claim. It emphasizes that courts can apply foreign law without losing jurisdiction. The court also denied Wharf's motion to dismiss for forum nonconveniens, which was not appealed. Importantly, Wharf did not raise any choice of law issue regarding UIH's Rule 10b-5 claim, as the anti-fraud provisions under the Securities Exchange Act apply due to significant conduct occurring in the U.S. The pivotal meeting that underpins UIH's claim took place in Denver, Colorado, where key negotiations and misrepresentations occurred. Consequently, jurisdiction is appropriate despite some related actions occurring abroad. The court found no compelling international comity or choice of law issues that would necessitate declining jurisdiction, noting that a true conflict, requiring compliance with conflicting laws, must be proven for such considerations to apply.

A true conflict of law regarding securities fraud would only arise if Hong Kong law mandated such fraud rather than merely allowing it. Wharf has not sufficiently demonstrated that Hong Kong is the proper forum or that its law is applicable to the dispute. Unsigned documents indicating that Hong Kong law applies and that the parties would submit to its non-exclusive jurisdiction are insufficient to establish binding forum selection or choice of law provisions, which require clear, exclusive designation of a forum. Previous cases cited by Wharf involved unambiguous signed contracts, which differ from the current situation. Wharf's reference to the Restatement (Second) of Conflict of Laws does not specify any conflicting Hong Kong law. Courts typically do not address choice of law issues without a clear conflict, as seen in various precedents. Additionally, Wharf contends the district court erred by not instructing the jury on the statute of frauds, arguing that the oral option from UIH should be barred under Colorado’s statutes. The court found the option did not fit the definition of "security" under C.R.S. 4-8-319 and that exceptions applied. Wharf’s claim related to C.R.S. 38-10-112(a) is waived due to not being raised in district court. The statute C.R.S. 4-8-319 requires a signed writing to enforce a contract for the sale of securities, along with other conditions regarding the transfer of securities.

The excerpt addresses the criteria under which a contract may be enforced despite the statute of frauds, specifically focusing on the nature of the "security" involved in a dispute between Wharf and UIH regarding an option to purchase CNCL stock. Wharf claims the security is CNCL stock, while UIH argues that the option itself is the relevant instrument. The October 8, 1992, contract involved UIH trading services for an option to purchase CNCL securities. 

The court distinguishes between the definitions of "security" under state law (C.R.S. 4-8-102) and federal law, concluding that UIH's oral option does not meet the state definition but qualifies as a security under federal securities law. Consequently, Wharf could not invoke the statute of frauds due to its failure to demonstrate that the option was a security under state law.

The district court found that several equitable exceptions to the statute of frauds applied, specifically highlighting the partial performance exception. This exception, based on Colorado case law, applies when there is substantial partial performance of an oral contract that is distinctly referable to the alleged agreement, indicating the existence of the contract. The court affirms that such partial performance precludes the application of the statute of frauds.

An oral agreement between UIH and Wharf required UIH to provide additional services, which UIH substantially fulfilled, a fact not disputed by Wharf. Wharf claims that UIH's efforts were aimed at persuading it to sell 10% of CNCL stock, leading to factual questions regarding partial performance. Wharf contends that the district court wrongly removed this issue from the jury and failed to instruct on partial performance. However, the district court did not err in its decisions; it determined that Wharf's proposed instruction was unnecessary since the jury correctly understood the governing law through current instructions. The jury found that consideration existed for the oral option agreement, indicating UIH's assistance was not for unrelated reasons as claimed by Wharf. While the district court may give a separate instruction on partial performance if warranted, there was no prejudice to Wharf from its failure to do so. Additionally, Wharf argues that UIH's claims of fraud, breach of fiduciary duty, and negligent misrepresentation are barred by the economic loss rule, which precludes recovery in tort for damages that arise from a breach of contract. Wharf asserts that UIH's tort claims lack independent allegations of tortious conduct. The court reviewed these claims and found Wharf's argument without merit, clarifying that the economic loss rule in Colorado applies only to negligence claims, not to fraud or breach of fiduciary duty claims.

No tort claim exists for purely economic damages resulting from a negligent breach of a contractual duty, as established in Jardel, 770 P.2d at 1303. The Colorado Court of Appeals differentiated cases involving negligence from those involving intentional torts, reinforcing this distinction in subsequent cases like Town of Alma v. Azco Constr. Inc. and Grynberg v. Agri Tech, Inc. In Grynberg, the court disallowed a negligence claim based solely on contractual duties but permitted a breach of fiduciary duty claim. The economic loss rule does not bar all claims related to a contractual transaction, only those arising from breaches of contractual duties. UIH's breach of fiduciary duty claim stemmed from their joint venture status, while its fraud claim, based on representations made during negotiations, also arose independently of the contract. The Colorado Supreme Court in Brody v. Bock affirmed that fraudulent representations could support both a tort claim and an oral contract claim. Additionally, negligent misrepresentation claims may be valid under tort law, even if they relate to contractual situations, particularly when one party makes false representations that the other relies upon in a business transaction. Colorado recognizes such claims as independent of contract law principles, allowing for tort liability in cases of deliberate or negligent misrepresentation.

A negligent misrepresentation claim arises from a common law duty, not a contractual obligation, which requires a party to exercise reasonable care in providing information that others may rely upon. This principle allows UIH's claim to proceed despite the economic loss rule. Wharf challenges the sufficiency of evidence supporting UIH's claim of having an oral option to invest, arguing that documentary evidence contradicts this claim. On appeal, the review is limited to whether there is substantial evidence in favor of the jury's decision. The jury is responsible for assessing credibility and resolving evidentiary conflicts. 

The record contains sufficient evidence indicating that UIH obtained an option on October 8, 1992, based on testimonies that Ng granted the option in exchange for UIH’s services. Internal documents from Wharf suggest discussions about disengaging from the agreement, creating factual conflicts rather than negating UIH's claims. The jury concluded that UIH and Wharf did not intend to be bound solely by a written contract, a finding supported by substantial evidence.

The jury awarded UIH $67,000,000 in compensatory damages and $58,500,000 in punitive damages, leading to a total judgment of $125,000,000. Wharf argues that the compensatory award was excessive, speculative, and did not consider UIH’s duty to mitigate damages, while also contesting the punitive damages based on lack of evidence.

UIH had to pay an estimated $50 million or more to exercise an option for a 10% stock interest in CNCL, alongside a corresponding 10% capital funding contribution. Wharf contends that Jones's valuation did not account for this funding requirement. A critical issue is whether Wharf preserved its sufficiency of evidence claim for appellate review by filing a motion for directed verdict under Federal Rule of Civil Procedure 50(a) at the close of evidence. Such motions must specify the judgment sought and the legal and factual bases for it. Wharf claims it raised the damage issue during its directed verdict motion and reiterated it in post-trial motions. However, the oral motion at trial did not mention damages, covering various other topics instead. Wharf argues that the damage issue was implicitly included in its other claims. The court emphasizes that while Rule 50 allows for liberal interpretation, sufficient specificity is required to inform the court and opposing counsel of the movant's position. Wharf failed to meet this specificity requirement, as it did not clearly articulate the grounds for its motion related to damages. The court references a precedent where a sufficiency argument was dismissed because it was not raised consistently in the directed verdict motion.

A defendant's challenge regarding the sufficiency of proof for bond coverage was dismissed, as the defendant only moved for a directed verdict based on claims of speculation and conjecture. Prior cases establish that merely moving for a directed verdict does not preserve all possible issues not raised in the motion. Since the defendant, Wharf, did not raise the sufficiency issue until after the trial, the appellate review is restricted to whether any evidence supports the damage award. Testimony from financial analyst Jones was deemed adequate; he provided detailed explanations of his valuation methods for UIH's losses and calculated the net present value of UIH's 10% investment in CNCL, factoring in projected revenues, operating expenses, and capital contributions. This resulted in a jury award of $67,000,000, which Wharf claimed was excessive and speculative. However, the district court's denial of Wharf's motion for a new trial or remittitur will only be overturned on appeal in cases of gross abuse of discretion. The jury's role in evaluating credibility and fixing damages is emphasized, and the evidence presented by Jones was sufficient to justify the damage award. The claim of excessiveness was rejected, and the jury's decision was viewed as based on appropriate testimony rather than improper influences. Furthermore, claims regarding speculative income projections were dismissed, affirming that new businesses can seek damages despite uncertainties.

Damages can only be excluded when there's mere anticipation of a market entry or when damages cannot be reasonably determined. A damage award is permissible if backed by substantial evidence, allowing for reasonable inferences for its computation. Testimony from Jones and his projections provided a sufficient basis for the jury’s damage award. Wharf contested the district court's refusal to admit evidence regarding CNCL's post-1994 performance and UIH's alleged failure to mitigate damages, with such exclusions reviewed for abuse of discretion. The court ruled the evidence irrelevant since damages were fixed when Wharf denied UIH's option claim on March 18, 1994, as breach of contract damages are typically measured at the time of the breach.

Wharf claimed UIH failed to mitigate damages by not investing funds elsewhere, asserting that a party must take reasonable steps to minimize damages. However, Wharf did not provide sufficient evidence to support this claim, nor did it demonstrate that UIH had other investment opportunities. The court determined that evidence supporting a failure to mitigate was also insufficient, leading to the exclusion of this defense from the jury. Additionally, Wharf argued that evidence was insufficient for the punitive damages award.

Wharf contends that the evidence suggests it did not promptly inform UIH of its decision not to proceed with contract negotiations, describing UIH's injury as a loss of a contractual opportunity. Under Colorado law, punitive damages may be awarded in civil actions where the injury involves fraud, malice, or willful misconduct, as defined by C.R.S. 13-21-102(1)(a). Willful and wanton conduct is characterized by a purposeful disregard for the safety and rights of others. The punitive damages awarded must be reasonable and generally cannot exceed compensatory damages, with the burden of proof lying on the party seeking punitive damages to establish entitlement beyond a reasonable doubt.

The assessment of evidence supporting a punitive damages award is a legal question reviewed de novo, considering the evidence in a light favorable to the verdict. The jury found substantial evidence that, on October 8, 1992, Ng granted UIH a 10% option, while knowing Wharf would not permit UIH to exercise it. Internal memos from Wharf indicated deliberate misrepresentations and stall tactics in dealings with UIH. While Wharf highlighted contradictions in UIH’s account, the presence of conflicting testimony does not preclude the jury from establishing facts beyond a reasonable doubt.

Wharf argued that the district court improperly declined its motion to reduce the punitive damages, but the court found sufficient grounds based on Wharf's disregard for UIH. The court had discretion under C.R.S. 13-21-102(2) to either reduce or uphold the award depending on whether it was supported by adequate evidence and not unconstitutional in its amount.

Finally, Wharf claimed the punitive damages award was unconstitutional, distinguishing between compliance with state law and adherence to the Due Process Clause of the Fourteenth Amendment. The Supreme Court's decision in BMW of North America, Inc. v. Gore provided a framework for evaluating whether a punitive damages award is "grossly excessive."

Reviewing the issue de novo, a multi-step analysis under BMW determines if a punitive damages award is constitutionally valid. Initially, it identifies the State interests served by punitive damages, which include punishment for unlawful conduct and deterrence against future offenses. Next, it assesses whether the defendant was provided "fair notice" of the conduct leading to punishment and the severity of potential penalties, guided by three factors: the reprehensibility of the defendant’s conduct, the ratio of the punitive damages to the actual or potential harm, and a comparison with civil or criminal penalties for similar misconduct.

In the case at hand, evidence suggests that Wharf engaged in reprehensible conduct by deliberately misleading UIH to secure a valuable license worth at least $500 million, with repeated misrepresentations over time. Although UIH's economic injury might typically lessen the justification for punitive damages, intentional misconduct, especially against a financially vulnerable party, can warrant substantial penalties. 

The analysis also considers the ratio of punitive damages to compensatory damages. Despite the large punitive award of $58.5 million, it constitutes 87% of the $67 million compensatory damages, which is within a permissible range. The precedent indicates that a punitive damages award is rarely deemed "grossly excessive" when the ratio is less than 1:1. Thus, the punitive damages in this instance are justified and not considered excessive under constitutional standards.

The comparison of punitive damages awarded to Wharf with potential civil and criminal penalties for similar misconduct reveals that while the fines under the Securities Exchange Act can reach $2,500,000 for corporations and $1,000,000 for individuals, these amounts are not as financially severe as the punitive damages assessed. However, this disparity does not necessitate a reduction in the punitive damages, as the assessment of such damages is informed by the extent of the harm inflicted by the defendant. Colorado law (C.R.S. 13-21-102(1)(a)) indicates that punitive damages should not exceed compensatory damages, establishing that defendants are aware that punitive awards correlate with the harm caused.

The punitive damages in this case represent 87% of the compensatory damages, reflecting the significant losses incurred by UIH due to Wharf's reprehensible actions, thus not violating the Fourteenth Amendment as being "grossly excessive." 

Regarding prejudgment interest, the district court awarded UIH $28,208,440 based on an eight percent interest rate from October 31, 1992, to May 21, 1997. Under Colorado law (C.R.S. 5-12-102(1)(a)), a prevailing party is entitled to prejudgment interest when money is wrongfully withheld. Wharf argues this statute is inapplicable since UIH claims only a right to future income. However, Colorado case law supports that parties damaged by contract breaches are entitled to prejudgment interest from the time of the breach, regardless of the nature of the claimed damages.

A party damaged by a breach of fiduciary duty is entitled to recover prejudgment interest from the date of the breach, as established in Colorado law. Section 5-12-102 allows for recovery of prejudgment interest not only for breaches of contract or fiduciary duty but also for tortious conduct. In this case, UIH successfully prevailed on its contract and tort claims, thus qualifying for prejudgment interest under C.R.S. 5-12-102.

Regarding post-judgment issues, Federal Rule of Civil Procedure 62(a) prohibits execution of a judgment until ten days post-judgment entry, with a stay during appeals if a supersedeas bond is filed. Wharf failed to satisfy the judgment or file the bond, leading UIH to seek execution of the judgment. UIH obtained permission to register the judgment under 28 U.S.C. 1963 and subsequently sought an order for sale proceeds from Wharf's hotel. Despite a court order, Wharf proceeded with the sale and transferred funds out of the U.S.

To identify Wharf's assets, UIH issued interrogatories revealing limited funds in New York accounts. UIH then filed a Motion for Assistance with a Writ of Execution, aiming to compel Wharf to deliver foreign bank accounts and stock certificates to the U.S. Marshal. A magistrate judge granted the motion, directing Wharf to collect $150 million in assets from Hong Kong and Singapore. Wharf objected, and the district court stayed enforcement pending a hearing. After affirming the magistrate's order, the court rejected Wharf's claims against the turnover order, emphasizing that compliance could have been achieved by posting a supersedeas bond.

Following Wharf's non-compliance with the turnover order, the court scheduled a hearing to address potential contempt. On December 4, the court found Wharf in willful contempt and ordered it to pay UIH's attorney fees, which could not be vacated. Wharf could purge itself from contempt by posting a bond within ten days, while a daily monetary sanction was imposed reflecting the accruing interest on the judgment.

Wharf was warned by the court that after a ten-day grace period, any accruing monetary sanctions would remain effective without exception. The sanctions would persist until Wharf either posted a supersedeas bond or complied with a turnover order. Wharf failed to post the bond by the deadline, prompting the court to reaffirm the sanctions and clarify that they could not be vacated. During a December 22 hearing, the court imposed further restrictions due to Wharf's non-compliance, prohibiting Wharf from seeking equitable relief while in contempt and barring it from conducting business with any financial institutions involved in loaning or transferring funds in the U.S.

By mid-January 1998, Wharf attempted to obtain a supersedeas bond. The court then halted the accrual of contempt sanctions and approved the bond on January 27, leading to a stay of enforcement proceedings against Wharf and the vacation of a prior turnover award. At the time sanctions ceased, Wharf owed $944,233.10 in contempt sanctions and $144,457.91 in attorney fees. Wharf is appealing the imposition of these sanctions and fees, claiming the district court lacked subject matter jurisdiction, misused equitable relief, and violated principles of extraterritoriality and international comity. The review of the district court's application of Colorado law will be conducted de novo. Under Federal Rule of Civil Procedure 69(a), a federal court in Colorado can apply state law in execution-related proceedings, supporting the validity of the turnover order if authorized by Colorado law. Colorado Rule of Civil Procedure 69(g) permits the court to direct parties to apply non-exempt property toward satisfying a judgment, with disobedience punishable by contempt, underscoring that this rule does not limit other creditor remedies.

A party is entitled to use supplemental proceedings to collect a judgment from the defendants' property, as supported by Rule 69(g), which allows for turnover orders similar to the one issued by the district court. Wharf contends that the turnover order acts as a mandatory injunction, but factual findings necessary for injunctive relief are only required if mandated by federal statute or state rules, which Colorado law does not stipulate for Rule 69(g) actions. Wharf also claims the order violates principles of extraterritoriality and comity, arguing that it should not be held accountable for actions beyond U.S. jurisdiction. However, the court asserts that it can order a party with personal jurisdiction to turn over assets regardless of their location. Wharf has not provided sufficient justification for overturning the turnover order on comity grounds, as compliance did not conflict with Hong Kong law or other obligations. Wharf's noncompliance led to complications with banks, which is attributed to its own actions. The court confirms its authority to issue the turnover order and reviews its contempt ruling against Wharf under an abuse of discretion standard. Wharf's argument that the court improperly used contempt powers misunderstands the nature of the order, as contempt was for failing to comply with the turnover order, which Colorado law supports. The court retains the ability to issue ancillary orders within execution proceedings, including directives for the transfer of property.

Willful noncompliance with court orders can lead to remedial or punitive sanctions. In the case of In re Marriage of Nussbeck, the district court properly found Wharf in contempt and imposed sanctions, as Wharf had the same obligations as any litigant. Wharf failed to either satisfy a judgment or post a supersedeas bond, which it acknowledged was a willful choice, despite having the financial means to comply. The court's decision to uphold the contempt finding was affirmed. Additionally, regarding securities law, the excerpt notes that previous cases, including SEC v. Jakubowski, have clarified that misrepresentations that lead to non-purchases do not fall under the scope of Rule 10b-5, as they do not relate to actual sales. Furthermore, Section 4-8-319 was repealed in 1996, and under Colorado law, contracts for the sale of securities are enforceable regardless of whether they are in writing. Cases cited by Wharf do not support its position, as they pertain to the invalidity of enforcement actions not compliant with state law.